THE NATIONAL TREASURY
Republic of South Africa
October 2005
SUPPLY CHAIN MANAGEMENT:
A GUIDE FOR ACCOUNTING OFFICERS OF
MUNICIPALITIES AND MUNICIPAL ENTITIES
THE NATIONAL TREASURY: Republic of South Africa
2
PREFACE
The “Supply Chain Management: A Guide for Accounting Officers of
Municipalities and Municipal Entities”, gives guidance to the adoption of an
integrated supply chain management (SCM) function and its related
managerial responsibilities assigned to accounting officers in terms of
sections 62 and 95 of the Municipal Finance Management Act (MFMA).
This guide explains how Chapter 1 1 , Part 1 of the MFMA, the Municipal SCM
Regulations, and the SCM policy of the council or board of directors can be
adopted into an operational process for accounting officers at each step of the
SCM cycle.
The previous procurement and provisioning arrangements in local
government suffered from a number of limitations that needed to be
addressed. For example, the following deficiencies in governance had been
identified:
• the composition of tender (bid) committees gave rise to serious conflicts of
interests;
• the procurement and provisioning procedures were rule driven, and value
for money was almost always equated to the lowest price tendered - the
emphasis were exclusively focussed on monitoring inputs;
• procurement and provisioning activities often operated in isolation from
other management activities, with little or no linkage to budgetary /
strategic planning and integrated development plan (IDP) objectives;
• asset management focused on inventory control rather than on ensuring a
satisfactory return on the capital invested in inventories / assets;
• there was a lack of uniformity in documentation that caused uncertainty
and inefficiencies, both on the part of bidders and also procurement
practitioners;
• consultants were not selected in a systematic and competitive manner;
• the Preferential Procurement Policy Framework Act, No 5 of 2000
(PPPFA) and its associated Regulations are complex and difficult to
implement correctly, and procurement practitioners were not adequately
trained in its application;
• the costs and outcomes of the PPPFA were not fully quantified; hence it
was impossible to evaluate the merits of the system.
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In September 2003, Cabinet adopted a SCM policy document: “Policy
Strategy to Guide Uniformity in Procurement Reform Processes in
Government”, to replace the outdated procurement and provisioning practices
as described above. The new supply chain management function aligns as an
integral part of financial management that conforms to international best
practices in public sector procurement. The new arrangements promote
uniformity in processes and also in the interpretation of government’s
preferential procurement legislation and policies, which should themselves be
seen in the context of other related legislative and policy requirements.
Above all, these arrangements mean that responsibility and accountability for
SCM-related functions are devolved to accounting officers.
DISCLAIMER
This Guide is not a substitute for legislation and should not be used for legal
interpretations.
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INDEX
Page
PREFACE 2
GLOSSARY AND ABBREVIATIONS 8
CHAPTER 1 : INTRODUCTION
Background 9
Improving Accountability 9
Introduction of an integrated SCM function for Government: 10
Objectives of Supply Chain Management 1 0
Supply Chain Management Model 1 1
CHAPTER 2: IMPLEMENTATION STRATEGY
Introduction 14
Role-players in Supply Chain Management 14
The National Treasury 14
Provincial Treasuries 16
Municipalities / Municipal Entities 1 6
The Municipal Council 16
The Accounting Officer 17
Municipal SCM Units 17
Delegations 17
Clearance of Members of the Adjudication Committee(s) 1 9
Participation of Consultants / Advisors 1 9
Negotiations with Preferred Bidders 19
Municipal SCM Training 20
Monitor and Promoting Uniformity in SCM Practise 20
Fraud and Corruption 20
CHAPTER 3: DEMAND MANAGEMENT
Introduction 22
Demand Considerations: 22
Appointment of a Bid Specification Committee 22
Flowchart of the Demand Management Process 24
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CHAPTER 4: ACQUISITION MANAGEMENT
Introduction 25
Assessment of the Market 25
Sourcing Strategy 25
Acquisition Process 26
Compilation of List of Accredited Prospective Providers 29
Other Considerations in the Bidding Process 30
Deviation and Ratification of Minor Breaches of
Procurement Processes 33
Unsolicited Bids 34
Bidding Procedures 35
Compiling Bid Documents 35
General Provisions for bids 38
Inviting Bids 45
Receiving Bid Responses 47
Evaluating Bid Responses 48
Appointment of Bid Evaluation Committee 48
Bid Evaluation Committee 48
Clearing Successful Bidder and Awarding Contracts 50
The Bid Adjudication Committee 50
Flowcharts for Acquisitioning Management: 53
Local vs. International Sourcing 53
Acquisition Procedures for Price Quotations 54
Acquisition Procedures for Competitive Bidding 55
Inviting of Bids 56
Standard Bid Document Setting 57
Conditions of the Bid 58
CHAPTER 5: APPOINTMENT OF CONSULTANTS
Introduction 60
Applicability of Procedures 61
General Approach 61
Conflict of Interest 62
Associations between Consultants 63
Promoting Government’s Preferential Policies 63
Training or Transfer of Knowledge and Skills 63
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Steps to follow when selecting Consultants 64
The Four Stages of Selection 64
Identify the Approach 64
Invite Bids/Proposals, using QCBS 66
Request for Bids 66
Request for Proposals 68
Receipt of Proposals 70
Evaluation of Bids/Proposals 71
Calculation of Percentage for Functionality 71
Calculation of Percentage for Price 72
Calculation of Points for Functionality and Price 72
Other Methods of Selection:
Quality-Based Selection (QBS) 77
Selection under a Fixed Budget 78
Least-cost Selection 79
Selection based on Consultants’ Qualifications 79
Single-Source Selection 79
Selection of Individual Consultants 81
Selection of Particular Types of Consultants 81
Establishment of a List of Approved Service Suppliers 83
Evaluation of the Performance of Consultants 84
Types of Contracts for Consultants 84
Important Provisions for Contracts with Consultants 86
Information to Consultants (ITC) 88
Scheduling the Selection Process 88
Disbursements 90
Consultant’s Role 90
Confidentiality 91
Debriefing 91
CHAPTER 6: LOGISTICS MANAGEMENT
Introduction 92
Stock Levels 92
Placing of Orders 92
Order Processing 93
Vendor Management 93
Stores/Warehouse Management 93
Issuing/Distribution of Items 94
Stocktaking 94
Transport Management 94
Accounts Payable 95
Losses/Surpluses 95
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CHAPTER 7: DISPOSAL MANAGEMENT 96
CHAPTER 8: SUPPLY CHAIN PERFORMANCE 98
MEASUREMENTS
ANNEXURE A
SUPPLY CHAIN MANAGEMENT LEGISLATION 1 00
AND DIRECTIVES
ANNEXURE B
MUNICIPAL SCM IMPLEMENTATION TEMPLATE 1 08
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GLOSSARY
Accounting Officers
As defined in Sections 60 and 93 of the MFMA
Municipality / Municipal Entity
In this document, the term is used to mean all
municipalities and municipal entities to which
the MFMA applies.
ABBREVIATIONS
BEE
Black Economic Empowerment
BBBEE
Broad-Based Black Economic Empowerment
CFO
Chief Financial Officer
CIDB
Construction Industry Development Board
DTI
Department of Trade and Industry
GCC
General Conditions of Contract
HDI
Historically Disadvantaged Individual
IDP
Integrated Development Plan
IPFA
Institute for Public Finance and Auditing
MBD
Municipal Bidding Document
MSCM
Municipal Supply Chain Management
NEPAD
New Partnership for Africa’s Development
NSBC
National Small Business Council
MFMA
Municipal Finance Management Act
PPPFA
Preferential Procurement Policy Framework Act
RDP
Reconstruction and Development Programme
SAICA
South African Institute for Chartered Accountants
SALGA
South African Local Government Association
SAMDI
South African Management Development Institute
SANAS
South African National Accreditation System
SARS
South African Revenue Services
see
Special Conditions of Contract
SCM
Supply Chain Management
SCOPA
Standing Committee on Public Accounts
SITA
State Information Technology Agency
SMME’s
Small, Medium and Micro Enterprises
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INTRODUCTION
i
1.1 Background
1.1.1 Government is intent on modernising the management of the public
sector, to make it more people-friendly and sensitive to meeting the
needs of the communities it serves. Immediately on taking office in
1994, Government initiated a series of budgetary and financial
reforms. Since then, significant progress has been made in
implementing these reforms.
1.1.2 A basic principle is that managers should be given the flexibility to
manage, within a framework that satisfies the constitutional
requirements of transparency and accountability. There are many
obstacles to overcome, most notably, a series of deeply ingrained
practices. Another obstacle can be seen in the cumbersome
procurement processes, where the legislation empowered Councils
to determine the award of contracts. Whenever any other legal
entity other than the Accounting Officer takes the final decision
regarding any expenditure, the Accounting Officer cannot be held
accountable.
1.2 Improving Accountability
1.2.1 The MFMA aims to improve accountability by placing responsibility
for decisions in the hands of each accounting officer and by
ensuring that there is a framework of support from National
Treasury, for example, in the form of ‘best practice’ guidelines, to
assist managers in delivering services to communities as efficiently
and effectively as possible.
1.2.2 The accountability chain is the most critical driver for improving
financial management in the public sector. The accounting officer’s
annual report and the report of the Auditor-General will indicate
achievement against the intentions specified in each municipality /
municipal entity’s Integrated Development Plan (IDP) and may
highlight areas that require improvement.
1.2.3 A particular requirement of the MFMA is that each accounting
officer undertakes a ‘risk assessment’ for his/her municipality or
municipal entity. Risk management acknowledges that all the
activities of an organisation involve some element of risk.
Management should decide what is an acceptable level of risk
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(given cost and other social factors) by objectively assessing the
factors (risks) that may prevent a particular activity from meeting its
objective. In the case of SCM, this will include ensuring - on a
case-by-case basis - that risks such as price or currency
fluctuations are allocated to the appropriate party in unambiguous
contract documents, or that guarantees or insurance arrangements
are in place (managers must manage!).
1.2.4 In addition, the award and management of contracts is an area
where fraud and corruption has been found in the past, and the
municipality / municipal entity’s “Fraud Prevention Plan” should
reflect this, through cost-effective use of control measures,
procedures and an ethical culture.
1.3 Introduction of an integrated SCM function for
Government
1.3.1 Cabinet approved on 23 September 2003 the implementation of an
integrated SCM function.
1 .3.2 The Objectives of Supply Chain Management (SCM) are to:
• give effect to the provisions of the Constitution, 1996;
• give effect to the provisions of the MFMA, 2003;
• transform outdated procurement and provisioning practises
into an integrated SCM function;
• ensure that SCM forms an integral part of the financial
management system of the municipality / municipal entity;
• make significant improvement to financial management in the
broader public sector;
• introduce a system for the appointment of consultants;
• create a common understanding and interpretation of
government’s preferential procurement policy objectives;
• promote consistency in respect of supply chain management
policy and other related policy initiatives in Government;
• align with global trends and ensure that South Africa adheres
to international best practices.
1 .3.3 Elements of Supply Chain Management
1 .3.3.1 The elements of SCM, where value is added at every stage, are
illustrated in the diagram below:
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SUPPLY CHAIN MANAGEMENT MODEL
Elements of Supply Chain Management:
SUPPLY CHAIN MANAGEMENT
SUPPLY CHAIN PERFORMANCE
DATABASE/S
1 .3.3.2 The elements of SCM are summarised below and an explanation of
the detailed application of each is contained in subsequent chapters
of this Guide.
■ Demand Management This is the beginning of the supply
chain where:
- a proper needs assessment is undertaken of required
goods, works and / or services;
- specifications are determined;
- the industry is analysed; and
- requirements are linked to the budget.
This phase brings the supply chain practitioner closer to the end
user, to ensure that value for money is achieved. The phase
implies, among others, that during the strategic planning of the
municipality / municipal entity’s IDP, or any part thereof, the
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functions to be executed are determined as well as the goods,
works and / or services needed to execute the said functions. The
demand requirement for goods, works and / or services are
therefore specifically budgeted and programmed for within the
municipality / municipal entity’s IDP.
■ Acquisitioning Management This is the management of
procurement by a municipality / municipal entity:
- to decide on the manner in which the market will be
approached;
- to establish the total cost of ownership of a particular type
of asset;
- to ensure that bid documentation is complete, including
evaluation criteria;
- to evaluate bids in accordance with published criteria; and
- to ensure that proper contract documents are signed.
■ Logistics Management: This aspect addresses:
- the setting of inventory levels;
- receiving and distribution of material;
- stores, warehouse and transport management; and
- the review of vendor performance.
From these processes, the financial system should be activated to
generate payments.
■ Disposal Management: At this stage consideration should be
given to:
- obsolescence planning;
- maintaining a data base of redundant material;
- inspecting material for potential re-use;
- determining a disposal strategy; and
- executing the physical disposal process.
■ Supply Chain Performance: This is the monitoring process,
undertaking a retrospective analysis to determine whether the
proper processes have been followed and whether the desired
objectives were achieved. Some of the issues that may be
reviewed are:
- compliance to policy objectives;
- cost efficiency of SCM process (i.e. the cost of the process
itself); and
- whether supply chain practices are consistent with
Government’s broader policy focus; and
- whether there are means to improve the system
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1 .3.3.3
The National Treasury has published municipal supply chain
management regulations in terms of section 168 of the MFMA to
prescribe minimum norms and standards for SCM practices at
municipalities / municipal entities. This will among others establish
minimum reporting requirements for accounting officers.
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2
IMPLEMENTATION STRATEGY
2.1 Introduction
2.1 .1 The introduction of the concept of an integrated SCM system for a
municipality / municipal entity will contribute significantly towards
the improvement of financial management in the broader public
sector. At the same time, it will create a consistent framework for
achieving Government’s SCM objectives. To achieve this
transformation, the phases listed below has been devised:
• firstly, councillors are prohibited from being involved in the
acquisitioning or selling or letting processes of any goods and /
or services in accordance with the prescripts of the MFMA;
• secondly, the implementation of the Municipal SCM
Regulations, whereby accountability is vested with the
accounting officer; and
• the monitoring process to ensure compliance.
2.1.2 The implementation of SCM at municipality / municipal entity is
supported by the following documents:
• Chapter 1 1 , Part 1 of the MFMA;
• Municipal SCM Regulations issued in terms of the MFMA;
• Municipal SCM ‘Model’ Policy issued by National Treasury to
be adopted by the municipality / municipal entity;
• “Supply Chain Management: A Guide for Accounting Officers
of Municipalities and Municipal Entities”, to assist the
accounting officer in compiling their internal processes and
procedures (operating manual);
• National Treasury’s standard and generic bid documentation to
promote and enhance SCM uniformity;
2.2 Role Players in Supply Chain Management
2.2.1 The National Treasury
2. 2. 1.1 The National Treasury, established in terms of Chapter 13 of the
Constitution, must promote and enforce transparency and
effective management in respect of revenue, expenditure, assets
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and liabilities in each sphere of government. In terms of section 5
of the MFMA, the National Treasury inter alia:
• may promote good budget and fiscal management by
municipalities, and for this purpose monitor the
implementation of municipal budgets, including their
expenditure, revenue collection and borrowing;
• investigate any system of financial management and internal
control in any municipality or municipal entity and
recommend improvements;
• take appropriate steps if a municipality or municipal entity
commits a breach of the MFMA, including the stopping of
funds.
2. 2. 1.2 A SCM Office has been established in the National Treasury to
oversee the implementation of SCM, in conjunction with provincial
treasuries. Its main functions are to:
• Formulate and advise on SCM implementation;
• Administer national supply chain management legislation
and regulations;
• Promote communications and liaison between different SCM
units across all spheres of government;
• Issue regulations to ensure uniform application of SCM in
government, including: -
- Addressing the requirement for consistency with other
policy initiatives in government;
- Ensuring that material construction standards become
increasingly aligned with those standards that support
international best practice;
- Establishing selection standards for the appointment of
consultants;
- Observing the principles of co-operative governance as
expounded in the Constitution; and
- Promoting the policy objectives outlined in the PPPFA,
BBBEE Act and their accompanying Regulations;
• Monitor for compliance with SCM Regulations and Guidelines;
• Establish minimum reporting requirements for accounting
officers;
• Investigate complaints received from the public regarding bid
procedures and irregularities;
• Maintain a Register for Tender Defaulters, containing the
names of tender defaulters as instructed by a court of law and
which will be made public; and
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• Monitor the manner in which SCM is implemented in respect of
government’s procurement reform objectives, the manner in
which targets are set and attained, and value for money is
obtained.
2. 2. 1.3 The National Treasury compiled a reporting mechanism to enable
provincial treasuries to monitor the implementation of SCM in a
municipality / municipal entity.
2.2.1 .4 The National Treasury’s responsibility is therefore to foster coherent
financial management and supply chain practice in all organs of the
state, across all three spheres of government.
2.2.2 Provincial Treasuries
2.2.2. 1 Where applicable, Provincial Treasuries may issue complementary
guidelines within the parameters as set by the National Treasury.
These standards may not jeopardize national objectives.
2. 2. 2. 2 A provincial treasury must also submit to the National Treasury
such SCM information as the National Treasury may require.
2.2.3 Municipalities / Municipal Entities
2.2.3.1 The Municipal Council
2. 2. 3. 1.1 The MFMA provides clear guidance on the administrative roles and
responsibilities of accounting officers and the oversight role of
council.
2.2.3. 1 .2 The MFMA recognizes the municipal council as the highest authority
in the municipality and strengthens the power of the council by
vesting it with significant powers of approval and oversight.
2. 2. 3. 1.3 Given the importance of the approval and oversight role of
councillors, the MFMA separates the policy-making responsibilities
of these role-players from the implementation role of the municipal
officials.
2. 2. 3. 1.4 Councillors are therefore not allowed to be members of a municipal
bid committee or any other committee evaluating or approving bids,
quotations, contracts or other bids, nor attend any such meeting as
an observer (section 1 17 of the MFMA)
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2.2.3.2 The Accounting Officer
2. 2. 3. 2.1 In terms of sections 62 and 95 of the MFMA, accounting officers are
fully responsible and should be held accountable for any
expenditures relating to SCM within their line of responsibility. Any
expenditure incurred should be subject to appropriate regulations
and accounting officers’ directives and procedures. However, to
ensure uniformity within the SCM system, guidelines issued by the
National Treasury will provide the necessary parameters.
2. 2. 3. 2. 2 It is the responsibility of each accounting officer to implement the
SCM policy adopted by council. The accounting officer may develop
an implementation plan to assist with managing the implementation
of the SCM policy (see Annexure B for implementation template).
2.2.3.3 Municipal SCM Units
2. 2. 3. 3.1 In terms of the policy of the municipality / municipal entity, Council
must establish the SCM unit. It is the responsibility of the
Accounting Officer to ensure that the SCM unit is properly staffed.
A parent municipality and a municipal entity under sole or shared
control may establish a joint supply chain management unit to
implement their respective supply chain management policies. SCM
is an integral part of financial management and the supply chain
management unit should preferably operate under the direct
supervision of the Chief Financial Officer.
2. 2. 3. 3. 2 Municipalities / municipal entities should ensure clear lines of
authority and accountability, as well as performance criteria that will
contribute towards minimizing risk, improving sourcing procedures
and processes and enhancing asset and inventory management.
2.3 Delegations
2.3.1 Sections 79 and 106 of the MFMA empower the accounting officer
of a municipality and municipal entity respectively to delegate
decision-making powers to officials.
2.3.2 The following should apply to acquisition of goods and services and
the disposal and letting of assets:
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• All delegations must be in writing;
• No supply chain management duties or powers may be
delegated or sub-delegated to a person who is not an official of
the municipality / municipal entity or to a committee which is
not exclusively composed of officials of the municipality /
municipal entity;
• Should the accounting officer decide that the adjudication
committee only awards bids up to a specified threshold value,
bids above that threshold value should be referred to the
accounting officer for finality;
• If a bid adjudication committee decides to award a bid other
than the one recommended by the bid evaluation committee,
the bid adjudication committee must prior to awarding the bid,
check whether that bidder’s municipal rates and taxes and
municipal charges are not in arrears and notify the accounting
officer;
• The accounting officer may, after due consideration of the
reasons for the deviation, ratify or reject the decision of the bid
adjudication committee;
• If the deviation is rejected, the accounting officer may refer the
decision of the adjudication committee back to that committee
for reconsideration;
• The accounting officer may at any stage of the bidding
process, refer any recommendation made by the evaluation or
adjudication committee with reasons back to that committee
for reconsideration of the recommendation;
• If a bid other than the one recommended in the normal course
of implementing the supply chain management policy of a
municipality or municipal entity is approved, the accounting
officer of the municipality or municipal entity must, in writing,
within 10 working days notify the Auditor-General, the relevant
provincial treasury and the National Treasury and, in the case
of a municipal entity, also the parent municipality, of the
reasons for deviating from such recommendations. This,
however, does not apply if a different bid was approved in
order to rectify an irregularity.
• The accounting officer may ratify any minor breaches of the
procurement processes by an official or committee acting in
terms of the delegated powers or duties that are purely of a
technical nature.
• Reports containing information regarding the individual
amounts of the awards, the contractor(s) and the reason why
each contractor was the successful bidder, must be submitted
within five working days of the end of each month to the
accounting officer if these bids were awarded under delegated
powers by the chief financial officer, a senior manager or a bid
adjudication committee of which the chief financial officer or a
senior manager is a member. Similar reports must be
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submitted within five working days of the end of each month to
the chief financial officer if bids were awarded under delegated
powers by a senior manager who awarded bids up to a
maximum value of R2,0 million or a bid adjudication committee
of which the chief financial officer or senior manager is not a
member.
2.4 Clearance of Members of the Adjudication
Committee(s)
2.4.1 All members of bid adjudication committee(s) should be cleared at
the level of “CONFIDENTIAL” by the Accounting Officer and should
be required to declare their financial interest annually.
2.5 Participation of Consultants / Advisors
2.5.1 The accounting officer may procure the services of consultants /
advisors to assist in the execution of the supply chain management
function. These services should be obtained through a competitive
bidding process. No consultant / advisor may, however, form part of
the final decision-making process regarding the award of bids, as
this will counter the principle of vesting accountability with the
accounting officer. The accounting officer cannot delegate decision-
making authority to a person other than an official.
2.6 Negotiations with Preferred Bidders
2.6.1 Accounting officers or their delegates may negotiate the final terms
of contracts with bidders identified as preferred bidders 1 through a
competitive bidding process, provided that such a process does not
allow the bidder concerned a second (unfair) opportunity and it is
not to the detriment of any other bidder. Minutes of such
negotiations must be kept for record purposes.
1 A preferred bidder is the bidder selected by means of the evaluation process with whom the
municipality / municipal entity intend to conclude the contract
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2.7 Municipal SCM Training
2.7.1 It is the responsibility of the accounting officer to ensure that supply
chain practitioners within their municipality / municipal entity are
properly trained. The South African Qualifications Authority (SAQA)
registered a unit standard-based certificate in Municipal Financial
Management Qualification as a level six qualification. Accredited
courses that meet the National Treasury evaluation process will be
published, as and when, on the National Treasury website.
Municipalities should first check the website at www.treasury.qov.za
click on the MFMA icon on the webpage and utilize this information
to send officials on appropriate training.
2.8 Monitoring and Promoting Uniformity in SCM Practise
2.8.1 The National Treasury, in conjunction with provincial treasuries, will
oversee the implementation of municipal supply chain
management. The provincial treasury will assist with the monitoring
to ensure the municipality / municipal entity implements the SCM
policy that was adopted by council or the board of directors.
Furthermore, the provincial treasury will assist in the monitoring to
ensure that municipality / municipal entity complies with the policy
objectives as determined by the National Treasury.
2.9 Fraud and Corruption
2.9.1 Government’s policy is to require that bidders and/or contractors,
including consultants, observe the highest standard of ethics during
the selection and execution of contracts. In pursuance of this policy,
Government defines, for the purposes of this provision, the terms
set forth below:
• “corrupt practice” means the offering, giving, receiving, or
soliciting of any thing of value to influence the action of a
public official in the selection process or in contract execution;
and
• “fraudulent practice” means a misrepresentation of facts in
order to influence a selection process or the execution of a
contract to the detriment of the accounting officer, and includes
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collusive practices among bidders/contractors (prior to or after
submission of proposals) designed to establish prices at
artificial, non-competitive levels and to deprive the accounting
officer of the benefits of free and open competition.
2.9.2 The accounting officer:
• must reject a proposal for award if he/she determines that the
service supplier recommended for award, has engaged in
corrupt or fraudulent activities in competing for the contract in
question;
• may insist that a provision is included in the contract
agreement with the contractor, requiring contractors to permit
the accounting officer and/or relevant treasury to inspect their
accounts and records relating to the performance of the
contract and to have them audited by auditors appointed by
the accounting officer/relevant treasury.
• where evidence in support of corrupt, fraudulent practices or
criminal offences are reported and substantiated, the
accounting officer is to initiate criminal proceedings against
such business entity, official or other role player, and inform
the relevant Treasury of such measures.
• must consult the National Treasury’s Register for Tender
Defaulters before awarding of contracts.
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DEMAND MANAGEMENT
3
3.1 Introduction
3.1 .1 Demand management is the first phase of SCM. The objective is
to ensure that the resources required to fulfil the needs identified
in the Integrated Development Plan (IDP) of the municipality or
municipal entity are delivered at the correct time, price and place
and that the quantity and quality will satisfy those needs. As part
of this element of SCM, a total needs assessment should be
undertaken.
3.2 Demand Considerations
3.2.1 Accounting officers should ensure that:
• Future as well as current needs are understood;
• Requirements are linked to the budget;
• Specifications are determined;
• The need forms part of the strategic plan and Integrated
Development Plan (IDP) of the municipality / municipal entity;
• An analysis of the past expenditure and current usage of the
commodity may assist in determining the manner in which the
municipality / municipal entity will fulfil this need in the future;
• The optimum method to satisfy the need is considered;
• The frequency of the requirement is specified;
• The economic order quantity is calculated;
• When operating a store, minimum and maximum levels are
determined for inventories and that lead and delivery dates are
accurately identified; and
• An industry and commodity analysis is conducted.
3.2.2 Appointment of a Bid Specification Committee
The accounting officer should appoint a bid specification
committee that will compile the specification, determine goals as
contemplated in the Preferential Procurement Regulations, the
evaluation criteria and any special conditions of contract. The
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3.3
3 . 3.1
3 . 3 . 1. 1
delegated official or the Bid Adjudication Committee prior to the
advertisement of the bid must approve the specifications.
Managing demand will be a cross-functional exercise that brings
the supply chain practitioner closer to the end user and ensures
that value for money is achieved. Where there is a lack of capacity
(human resources) to establish the committee structure in a
specific municipality / municipal entity, it may be agreed upon to
share / utilize the committee structure of another municipality/
municipal entity if and when required. The accounting officer, who
initiated the requirement, will be accountable for the decisions
taken.
Flowchart of the Demand Management Process
Elements of the Demand Management Process
The elements of the demand management process are illustrated
in the diagram below:
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Flowchart of the Demand Management Process
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and Municipal Entities
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ACQUISITION MANAGEMENT
4
4.1 Introduction
In the past, most of the focus in the procurement process was devoted
to “meeting the requirements of the Council”. The new policy is
operational and councils and / or councillors are no more involved in
the considering and award of bids and accounting officers became
responsible for their procurement processes, within the framework
published by the National Treasury.
4.2 Assessment of the Market
4.2.1 If a need has to be satisfied by means of an outside source, whether it
is for goods, works or services, the availability of the source in the
market should be investigated. The purpose of this investigation is to
establish a balanced approach when considering, among others,
keeping pace with modern technology and development, enabling
newcomers/HDIs to supply the goods/services, making use of labour
intensive methods and promoting BEE.
4.2.2 The following elements should, among others, be considered:
• Benchmarking;
• Total cost of ownership; (cost drivers)
• Industry analysis; and
• Market characteristics (entry barriers; is the market buyer or
supplier driven; market players; market behaviour and
expenditure analysis).
4.3 Sourcing Strategy
4.3.1 Obtaining goods and / or services do not imply that these
requirements should be procured from outside sources only. As
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part of acquisition management, all possible methods of obtaining
the requirements should be investigated, such as:
• could other municipality / municipal entity satisfy the
requirements at a better price; and
• are the requirements available on the list of redundant /
obsolete material / goods from other municipality / municipal
entity.
4.3.2 The optimum sourcing strategy and technique should be used,
taking due cognisance of the nature of the commodity or service
required, the conditions of delivery, among others, just-in-time-
delivery, promoting BEE within the ambit of the BBBEE Act and
the Preferential Procurement Policy Framework Act. Sourcing
strategies might include, among others, the following:
• Local and / or international sourcing;
• Utilising a paper-based bidding system, which may include
obtaining quotations, inviting competitive bids, pre-qualification
of bidders and two-stage bidding;
• Strategic sourcing
• Utilising E-procurement; and
• Negotiations.
4.3.3 In order to facilitate the introduction of the new arrangements, this
Guide offers a step-by-step run through the acquisitioning process
municipality / municipal entity will need to apply.
4.4 Acquisition Process
4.4.1 What do you want to acquire? Is it:
IT Goods or Services?
Consider the utilisation of SITA
Building, Engineering or
Construction works?
The Construction Industry Development Board
(CIDB) has been established by government to
promote the uniform application of policy to the
construction industry. When calling for
construction bids, accounting officers should
utilise the standard bidding documents issued by
the CIDB. The contact number in this regard is
as follows:
Supply Chain Management: A Guide for Accounting Officers of Municipalities
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THE NATIONAL TREASURY: Republic of South Africa 27
Procurement Manager
CIDB
Private Box 2107
Brooklyn Square
Pretoria
0075
Tel. No. (012) 481-9030
Fax No. (012) 481-9087
Website: www.cidb.ora.za
e-mail: cibd@cidb.org. za
A Public Private
Partnership?
Ensure that the provisions of the Municipal
Public-Private Partnerships Regulations of April
2005 and Section 120 of the MFMA are adhered
to.
Consultancy Services?
Follow the procedure below and refer to Chapter
5 of this Guide
Other goods or services
Continue below
4.4.2 You require a good, work or service not listed above: can you
obtain it:
From the list of redundant/obsolete YES Contact the relevant municipality
Material / goods from other / municipal entity
municipality / municipal entity?
NO Continue below
4.4.3 You are acquiring goods, works or services not available from the
list above: Can you only acquire it in SA?
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NO
Is there a need for international
sourcing?
YES
Advertise
international
and utilise SA
embassies.
NO
Source from
local supplier:
continue
below
YES
Source from local supplier
Continue below
4.4.4 How are you going to acquire it?
4.4.4. 1 Procurement of goods, works and services, either by way of verbal /
price quotations or through a competitive bidding process must be
within the following threshold values (VAT included):
Is the value below R2 000 (VAT
included)
YES
Obtain requirement by
means of petty cash 2
procurement in
accordance with
internal prescribed
procedures
Verbal Price Quotations: Is the value
more than R 2 000 but less than R 10
000 (VAT included)?
YES
Obtain at least three
verbal quotations,
preferably from the list
of accredited
prospective suppliers.
The names and prices
2 “Petty Cash”, means a small amount of cash kept on hand for incidental purchases of low value goods and services
(i.e. postage, office suppliers, reimbursement out-of-pocket expenditures), which cannot be accommodated
through other purchasing procedures. Petty cash may not be used for payroll payments, inventory, capital goods,
entertainment expense, travel expenses and other personal obligations.
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of the prospective
suppliers must be
recorded. The order
must be placed against
written confirmation of
the selected supplier.
Written Price Quotations : Is the value up
to R200 000 (VAT included)?
YES
Obtain at least 3 written
quotations, if possible
from database
established for this
purpose. For all
procurement above
R30000 the prescripts
of the PPPFA and its
related regulations are
applicable. All
requirements above
R30000 must be
advertised for at least
seven (7) days on the
notice board and
website. Forward a
summarised report of
all procurement by
means of quotations to
the CFO on a monthly
basis.
Is the value above R 200 000?
YES
Use competitive bidding
process:
4. 4. 4. 2 Compilation of List of Accredited Prospective Providers
Accounting officers should compile a list of accredited prospective
providers to be used to procure requirements through written or
verbal quotations and formal written price quotations. This list
should also be used effectively to promote the objectives of the
Preferential Procurement Regulations as well as the Broad-Based
Black Economic Empowerment Act, Act No. 53 of 2003.
Accounting officers should, through newspapers commonly
circulating locally, the municipality’s / municipal entity’s website
and by any other appropriate ways, invite prospective providers,
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including black empowerment entities, to apply for evaluation and
listing as a prospective provider. Providers should be allowed to
submit applications for listing at any time. The list must be
updated at least quarterly. The listing criteria for accredited
prospective providers may include:
(a) promoting businesses located in a particular municipality;
(b) promoting small, medium and micro enterprises;
(c) promoting black economic empowerment.
Once the list has been compiled per commodity, price quotations
should be invited from such a list. The invitation of price
quotations from the compiled list of accredited prospective
providers per commodity should be done on a rotation basis in
such a manner that ongoing competition amongst providers is
promoted.
Where no suitable providers are available from the list of
accredited prospective providers, quotations may be obtained
from other possible providers. If it is not possible to obtain at least
three (3) quotations, the reasons should be recorded and
approved by the accounting officer or his / her delegate.
Accounting officers must apply the prescripts of the Preferential
Procurement Policy Framework Act, Act 5 of 2000 and its
associated Regulations for all procurement equal to or above
R30000. However, these prescripts may be applied for
procurement with a value of less than R 30 000, if and when
appropriate.
4.4.5 Other Considerations in the Bidding Process
4.4.5.1 Accommodation and Conferences
Accommodation and/or facilities for conferences, seminars,
workshops, “lekgotlas” etc. should, whenever possible, be
obtained by means of written price quotations or competitive
bidding. Should it not be possible or practical to follow the normal
competitive bidding process (see section 4. 4. 5. 5), the
accommodation and/or conference facilities should be obtained by
means of written quotations.
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4.4.5.2 Can I negotiate directly with a supplier?
YES, but
only
• Subject to the accounting officer’s approval; and
• There is an urgent need for the goods, works or services,
and engaging in bidding proceedings would be impractical,
provided that the circumstances giving rise to the urgency
were neither foreseeable by the procuring entity nor the
result of dilatory conduct on its part;
• Owing to a catastrophic event, there is an urgent need for
the goods, works or services, making it impractical to use
other methods of procurement because of the time involved
in using those methods; or
• Bidders have been identified as preferred bidders through a
competitive bidding process.
4.4. 5. 3 Can I use “limited bidding”?
YES
Use ‘Multiple source’ if...
There is limited competition, hence only a
few prospective bidders are allowed to
make a proposal. This should be based on
a thorough analysis of the market.
YES
Use ‘Single source’
This should be based on a thorough
analysis of the market and use a
transparent and equitable pre-selection
process, to request only one amongst a few
prospective bidders to make a proposal.
YES
Use ‘Sole source’ if....
There is no competition and only one
bidder exists (for example, sole distribution
rights)
NO
Use competitive bidding
The objective of competitive bidding is to
provide all prospective bidders with timely
and adequate notification of a municipality /
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municipal entity’s requirements and an
equal opportunity to bid for the required
goods, works or services. This allows for
unfettered competition.
4.4. 5.4 Can I use “two-stage bidding”?
YES, if...
It is ‘turnkey ’ 3 or contracts for large complex plants or
works of a special nature, when it may be undesirable
or impractical to prepare complete detailed technical
specifications in advance. Hence a two-stage bidding
procedure may be used, under which first unpriced
technical proposals on the basis of a conceptual
design or performance specifications are invited,
subject to technical as well as commercial
clarifications and adjustments. The technical and
commercial clarifications may include a
prequalification that bidders have to provide proof of
their ability to execute the project. In such a case it
may be prescribed that only those bidders who
prequalified, will be issued with the amended detailed
bid documents and offered the opportunity to submit
final technical proposals and price bids, as the
second stage. These procedures are also appropriate
in the procurement of equipment that is subject to
rapid technological advances, such as major
computer and communications systems. The
following circumstances apply:
• If it is not feasible to formulate detailed
specifications for the goods, works or services, to
identify their characteristics;
• If it seeks bids, proposals or offers as to various
possible means of satisfying needs; or
• Because of the technical character of the goods or
works, or because of the nature of the services, it
is necessary for the procuring entity to negotiate
with suppliers or contractors; and
• When the procuring entity seeks to enter into a
contract for the purpose of research, experiment,
3 “Turnkey", means a procurement process where one service provider assumes total responsibility for all aspects of
the project and delivers the full end product / service required by the contract.
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study or development, except where the contract
includes the production of goods in quantities
sufficient to establish their commercial viability or
to recover research and development costs.
4.4.5.5 Deviation from, and Ratification of Minor Breaches of
Procurement Processes
4. 4. 5. 5.1 Should it be impractical to invite competitive bids for specific
requirements, the accounting officer may dispense with official
procurement processes and procure required goods or services
by other means such as price quotations or negotiations.
4. 4. 5. 5. 2 Incidences where it will be impractical to invite competitive bids for
specific requirements, include, among others:
• emergency cases: cases where immediate action is necessary
in order to avoid a dangerous or risky situation or misery or
disaster such as floods and fires;
• in case of a sole supplier;
• for the acquisitioning of special works of art or historical
objects where specifications are difficult to compile; and
• acquisitioning of animals for zoos; or in any other exceptional
cases.
4. 4. 5. 5. 3 The accounting officer may also ratify any breaches of the
procurement processes by an official or committee acting in terms
of delegated powers or duties, which are purely of a technical
nature.
4. 4. 5. 5. 4 The accounting officer must record the reasons for any deviations
as mentioned above, and report it to the next meeting of the
council, or board of directors in the case of a municipal entity, and
include as a note to the annual financial statements.
4. 4. 5. 5. 5 The above does not apply to the procurement of goods and
services that include:
• water from the Department of Water Affairs or a public entity,
another municipality or a municipal entity; and
• electricity from Eskom or another public entity, another
municipality or a municipality.
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4.4. 5. 6
4.4. 5. 6.1
4.4. 5. 6.2
4. 4. 5. 6. 3
4.4. 5. 6. 4
4. 4. 5. 6. 5
4.4. 5. 6. 6
Unsolicited Bids
A municipality or municipal entity is in terms of section 113 of the
Act not obliged to consider unsolicited bids received outside a
normal bidding process.
If a municipality or municipal entity decides in terms of section
1 13(2) of the Act to consider an unsolicited bid, it may do so only
if:
• the product or service offered in terms of the bid is a
demonstrably or proven unique innovative concept;
• the product or service will be exceptionally beneficial to, or
have exceptional cost advantages for, the municipality or
entity;
• the person who made the bid is the sole supplier of the
product or service; and
• the reasons for not going through the normal bidding
processes are found to be sound by the accounting officer.
If a municipality or municipal entity decides to consider an
unsolicited bid that complies with Municipal SCM regulation
37(2), the municipality /municipal entity must make its decision
public in accordance with section 21 A of the Municipal Systems
Act, together with:
• its reasons as to why the bid should not be open to other
competitors;
• an explanation of the potential benefits for the municipality or
entity were it to accept the unsolicited bid; and
• an invitation to the public or other potential suppliers to
submit their comments within 30 days of the notice.
Once the municipality or municipal entity has received written
comments pursuant to Municipal SCM regulation 37(3), it must
submit such comments, including any responses from the
unsolicited bidder, to the National Treasury and the relevant
provincial treasury for comment.
The adjudication committee must consider the unsolicited bid
and may award the bid or make a recommendation to the
accounting officer, depending on its delegations.
A meeting of the adjudication committee to consider an
unsolicited bid must be open to the public.
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4. 4. 5. 6. 7 When considering the matter, the adjudication committee must
take into account:
• any comments submitted by the public; and
• any written comments and recommendations of the National
Treasury or the relevant provincial treasury.
4. 4. 5. 6. 8 If any recommendations of the National Treasury or provincial
treasury are rejected or not followed, the accounting officer must
submit to the Auditor General, the relevant provincial treasury and
the National Treasury the reasons for rejecting or not following
those recommendations.
4. 4. 5. 6. 9 Such submission must be made within seven days after the
decision on the award of the unsolicited bid is taken, but no
contract committing the municipality / municipal entity to the bid
may be entered into or signed within 30 days of the submission.
4.4.5.6.10 Note should be taken that inadequate attention given to
unsolicited bidding may cause undue problems in the entire
procurement process.
4.5 Bidding Procedures
4.5.1 There are essentially five distinct stages in the bidding process
and these are:
• Compiling bid documents;
• Inviting bids;
• Receiving bids;
• Evaluating bids;
• Clearing successful bidders and awarding contracts.
4.5.2 Compiling Bid Documents
4.5.2. 1 There is a dire need for generic documentation and contract
options that can be adapted to cater for specific industry
requirements. Bid documents define the rights, risks and
obligations of the parties involved in a contract and define the
nature, quantity and quality of the goods, services or works to be
provided in the performance of the contract. Accordingly, such
documentation should be legally and technically correct and
should assign risk in an appropriate manner.
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4. 5. 2. 2 Bid documents should comprise at least the following: General
Conditions of Contract, specifications, data sheets/drawings; and
a specific contract agreement stipulating delivery standards and
requirements. Uniformity in these documents will promote:
• Ease of entry by new emerging enterprises to public sector
procurement;
• Cost effectiveness, both in financial and human resource
terms;
• Improved understanding and easier interpretation by new
emerging contractors; and
• Simplification of the documentation process.
4. 5. 2. 3 Uniformity in contract documentation will result in:
• Bidders being able to more easily determine the scope and
extent of risk;
• Easier management of contracts between potential
contracting parties and the streamlining of administrative
procedures;
• Savings in cost and improvement in quality; and
• Greater transparency in terms of cost premiums paid in
pursuit of Government’s preferential procurement objectives.
4. 5. 2. 4 It is imperative that accounting officers take due care that
standardised bid documents are used for all standard
procurement of goods, works and services. It is the responsibility
of the National Treasury to issue pro forma standardised bid
documentation. In cases where special bid conditions make it
necessary to deviate from the standardised bid documentation, it
is advisable for accounting officers to provide written approval for
such deviations and that the motivation for deviations be
documented for auditing purposes.
4. 5. 2. 5 The Accounting officer should ensure that:
• bid documentation are in accordance with:
the general conditions of contract and supply chain
management guidelines of the National Treasury; and
- the prescripts of the Construction Industry Development
Board, in the case of a bid relating to the construction
industry;
• bid documentation include evaluation and adjudication
criteria, including the criteria prescribed in terms of the
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Preferential Procurement Policy Framework Act, 2000 (Act
No. 5 of 2000) and its related regulations, as well as the
Broad-Based Black Economic Empowerment Act, 2003 (Act
No. 53 of 2003) and its related regulations;
• bid documentation compel all bidders to declare any conflict
of interest bidders may have in a specific bid;
• SARS has certified that the bidder’s tax matters are in order
or that arrangements have been made to the satisfaction of
SARS that the outstanding tax obligations will be met;
• bid documentation prescribe that disputes be settled by
means of mutual consultation, mediation (with or without
legal representation), or, when unsuccessful, in a South
African court of law;
• bids must be advertised by means of public advertisement in
newspaper(s) commonly circulating locally, the website of
the municipality / municipal entity, and / or any other
appropriate ways (which may include an advertisement in the
Government Tender Bulletin);
• the information contained in the public advertisement must
include:
- the closure date for the submission of bids, which may
not be less than 30 days in the case of transactions
over R 10 million (VAT included), or which are of a
long term nature, or 14 days in any other case, from
the date on which the advertisement is placed in a
newspaper; and
- a statement that bids may only be submitted on the
bid documentation provided by the municipality or
municipal entity;
• The accounting officer may determine a closure date for the
submission of bids which is less than the 30 or 14 days
requirement, but only if such shorter period can be justified
on the grounds of urgency or emergency or any exceptional
case where it is impractical or impossible to follow the official
procurement process (please note: a lack of or bad planning
does not constitute an urgency or emergency);
• bids are opened in public as soon as possible after the
closing time on the closing date of bids. When requested by
any bidder or member of the public, the names of the bidders
who submitted bids in time be read out and when possible /
practical, also the respective total bidding prices. A register
must be compiled of all bids received in time during the bid
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opening process and must be available on request for public
perusal; and
4. 5. 2. 6 Accounting officers may request the State Information Technology
Agency (SITA) to assist with the acquiring of IT related goods and
services through a competitive bidding process. A separate service
level agreement between the accounting officer and SITA should
regulate the services rendered by and payment to SITA by the
municipality or municipal entity.
4. 5. 2. 7 Accounting officers must ensure that the applicable regulations
dealing with public-private partnerships have been adhered to
before entering into any public-private partnership or part of a
public-private partnership.
4. 5. 2. 8 The accounting officer may, on behalf of the municipality / municipal
entity, participate in any contract arranged by means of a
competitive bidding process by any other organ of state, subject to
the written approval of such organ of state as well as the written
approval of the relevant contractor(s).
4.5. 2. 9 General Provisions for Bids
General and Special All bids and contracts should be subject to the General Conditions of
Contract Conditions Contract (Annexure A) and any special conditions of contract, if specified.
To strive towards uniformity, all contracts must be based on the General
Conditions of Contract (GCC), issued by the National Treasury. Any
aspect not covered by the GCC should be dealt with in the special
contract conditions (SCC), which will be a separate document. Matters
such as attendance of compulsory site meetings, briefing sessions and
special delivery conditions must be covered in the SCC. The standard
wording of the GCC must not be amended. The GCC issued by the
Construction Industry Development Board should be utilized in cases of
bids related to the construction industry. Where the SCC are in conflict
with the GCC, the SCC will prevail. These conditions should form an
integral part of the bidding documents.
Accounting officers should ensure that the prescripts of the PPPFA and
the Regulations pertaining thereto are adhered to. The basis for bid
evaluation and selection should be clearly outlined in the instructions to
bidders and/or in the specifications.
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Using Standard
Bidding Documents
Municipality / municipal entity should customise and use the appropriate
Municipal Bidding Documents (MBDs) issued by the National Treasury
with minimum changes acceptable to the accounting officer, as necessary
to address contract- and project-specific issues. Where no relevant
standard bidding documents have been issued, the municipality /
municipal entity should use other internationally recognised standard
contract forms acceptable to the accounting officer, in concurrence with
the relevant Treasury. The standard bid documentation issued by the
Construction Industry Development Board should be utilized in cases of
bids related to the construction industry. Bid documents must include the
preference points system to be used, goals as contemplated in
Preferential Procurement Regulations and evaluation criteria.
Type of Contract
The bidding documents should clearly state the type of contract to be
entered into and contain the appropriate contract provisions. The most
common types of contracts provide for payments on the basis of lump
sum prices, unit prices, reimbursable cost plus fees, or combinations
thereof. Reimbursable cost contracts should be acceptable only in
exceptional circumstances, such as conditions of high risk or where costs
cannot be determined in advance with sufficient accuracy. Such contracts
should include appropriate incentives to limit costs and may only be
concluded subject to the approval of the accounting officer. It is advisable
that the reasons and formal approval for following the reimbursement
route are recorded for auditing purposes.
Language and
Clarity of
Documents
Bidding documents should be prepared in at least English.
Bidding documents should be worded such that they permit and
encourage competition.
Bid Content
Documents should specify clearly and precisely the work to be carried out,
the location, the goods to be supplied, the place of delivery or installation,
the schedule for delivery or completion, minimum performance
requirements and the warranty and maintenance requirements, as well as
any other terms and conditions. In addition, bidding documents should
define the tests, standards and methods that would be employed to judge
the conformity of equipment as delivered or works as performed, with the
specifications. Drawings should be consistent with the text of the
specifications and the order of precedence between the two should be
specified.
In addition to price, the bidding documents should specify any factors
which will be taken into account in evaluating bids and how such factors
would be quantified or otherwise evaluated. If bids based on alternative
designs, materials, completion schedules, payment terms, etc. are
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permitted, conditions for their acceptability and the method of their
evaluation should be expressly stated.
Each prospective bidder should be provided the same information and
should be assured of an equal opportunity to obtain additional information
on a timely basis. Municipality / municipal entity should provide
reasonable access to project sites for visits by prospective bidders. For
works or complex supply contracts, particularly those requiring
refurbishing of existing works or equipment, a pre-bid meeting may be
arranged for potential bidders to meet with the municipality / municipal
entity’s representatives to seek clarifications. Minutes of the meeting
should be provided to all prospective bidders. Any additional information,
clarification, correction of errors, or modifications of bidding documents
should be sent to each recipient of the original bidding documents in
sufficient time before the deadline for receipt of bids to enable bidders to
take appropriate actions. If necessary, the deadline should be extended.
Inspections, Tests
and Analyses
If it is a bid condition that goods to be produced or services to be
rendered should at any stage during production or execution, or on
completion be subject to inspection, the bid documentation should also
specify that the premises of the bidder or contractor should be open at all
reasonable hours for inspection by a representative of the municipality /
municipal entity or organisation acting on behalf of the municipality /
municipal entity.
Tax Clearance
It is Government’s policy not to enter into business arrangements with any
supplier whose tax affairs are not in order, or who has not made
satisfactory arrangements with SARS to meet any outstanding
obligations. Clearance must be obtained from SARS for all contracts
above the value of R 15 000 whether a preferred bidder’s tax matters are
in order. Presently, SARS will on request, issue tax clearance certificates
(valid for 12 months) to potential suppliers. SARS has ruled that only
original certificates should be accepted and that copies of acceptance of
bids together with copies of the original tax clearance certificate supplied
by the contractor be forwarded to them for control purposes at the
following address:
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The Commissioner
South African Revenue Services
Private Bag X923
PRETORIA
0001
For attention: Cecilia Makgeledisa
Tel: (012) 422 4444
Fax: (012) 422 6843
E mail: cmakgeledisa@sars.gov.za
If a “request for information” (RFI) bid is advertised, it is not necessary for
tax clearance certificates to be presented. Flowever, should it not be
included in the RFI bid, it must be included as a condition of bid in the
documents distributed to the bidders who did qualify.
Municipalities and municipal entities must include a condition of bid that a
bidder may have no undisputed commitments for municipal rates and
taxes and / or services towards the municipality or other service supplier
in respect of which payment is overdue for more than 30 days. The
inclusion of such a statement by the bidder is compulsory for any bid
submitted of which the value is R 10 million or more (VAT included).
• This present tax clearance system is under review for speedier
certification, but must be followed until further notice. Notice in form
of a circular will be given regarding the issue.
Registration of
Suppliers/Bidders
Suppliers / bidders who are compelled to register with controlling
authorities regarding their goods / services to be delivered / rendered,
should ensure that their relevant registration is in order prior to the closure
of the bids. Municipality / municipal entity should ensure that registration
facilities are in place prior to making such a requirement a condition of
tender.
Use of Brand Names
Specifications should be based on relevant characteristics and/or
performance requirements. References to brand names, catalogue
numbers, or similar classifications should be avoided. If it is necessary to
quote a brand name or catalogue number of a particular manufacturer to
clarify an otherwise incomplete specification, the words “or equivalent”
should be added after such reference. The specification should permit
the acceptance of offers for goods which have similar characteristics and
which provide performance at least equivalent to those specified.
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Pricing
Bidders should be required to quote unit prices or lump sum prices and
such prices should include all duties, taxes, percentage fees for cost
reimbursable contracts and other levies. Bidders should be allowed to
obtain all inputs from any eligible sources in order to offer their most
competitive bids.
In the case of turnkey contracts, the bidder should be required to quote
the price of the installed plant at site, including all costs for supply of
equipment, marine and local transportation and insurance, installation and
commissioning, as well as associated works and all other services
included in the scope of contract such as design, maintenance, operation,
etc. Unless otherwise specified in the bidding documents, the turnkey
price should include all duties, taxes, and other levies.
Preparation Time
The time allowed for the preparation and submission of bids should be
determined with due consideration of the particular circumstances of the
project and the magnitude and complexity of the contract. Generally, not
less than 14 days from the date of the invitation to bid or the date of
availability of bidding documents, whichever is later, should be allowed for
competitive bidding. For contracts above the value of R 10 million (VAT
included), such period may not be less than 30 days. In such cases, the
municipality / municipal entity is encouraged to convene pre-bid
conferences and arrange site visits.
In justifiable circumstances accounting officers may allow shortening of
the closing date. Cognisance should also be taken of the fact that the
shortening of the closing date should not disadvantage any potential
suppliers from bidding for the requirements.
Bid Submission
Bidders should be permitted to submit bids by mail or by hand. The
deadline and place for receipt of bids should be specified in the invitation
to bid.
Price adjustments
due to escalation
In some instances it might be in the best interest of the municipality /
municipal entity to allow price adjustments based on escalation. What the
best option should be will require a careful analysis of all related aspects
that will influence the adjusted price, including the cost for the additional
administrative work. If the accounting officer resolves to allow price
escalation as part of the contract, this should be specified in the bid
documents, including the formula and the time frames at which intervals
such price adjustments should be considered.
The following formula is recommended if adjustments of prices are
allowed:
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Pa = (l V)Pt{ Dl Rlt + D2 R2t + D3 R3t + D4 Mt V m
{ Rio R2o R3o R4o
Where:
Pa = The new escalated price to be calculated.
(1 -V) Pt = 85% of the original bid price.
Dl, D2= Each factor of the bid price e.g. labour, transport, clothing,
footwear, etc.
The total of the various factors Dl, D2...etc. must add up to
100%.
Rlt, R2t = index figure obtained from new index (depends on the number
of factors used).
R1 o, R2o= index figure at time of bidding.
VPt = 15% of the original bid price. This portion of the bid price
remains firm i.e. it is not subject to any price escalations.
Price adjustments
due to the fluctuation
in the Rate of
Exchange (ROE)
Rate of exchange claims relate to the fluctuation of other currencies in
relation to the South African rand. When Municipality / municipal entity
advertise bids which might involve imported contents, whether wholly or
partially, the ROE and future fluctuations are of vital importance,
especially for delivery over a specified period of say more than one year.
The decision of who should take responsibility for any absorption of the
fluctuation of a currency is similar to a decision of allocating risk. In this
regard, there are two extreme possibilities:
The supplier should bear all the risk and it is prescribed that the price will
be fixed for the tenure of the contract, irrespective of the fluctuation of the
currency. In such a case the supplier is free to arrange forward cover and
/ or to increase his / her price at bidding stage to cater for any fluctuation,
thereby taking the risk of not being the successful bidder. Whatever route
the supplier opts to follow, it will in all probability lead to an increase in
price at the original bidding stage. This might lead to a situation that right
at the commencement of the contract, the Municipality / municipal entity
will be obliged to pay more for the product than the retail price to the
general public.
The municipality / municipal entity can absorb the risk and providers may
bid firm prices, subject to ROE variation. In such cases the provider(s)
may apply for price increases / decreases when the currency fluctuates in
relation to the agreed currency. The problem in this regard is that the
prices are not always adjusted when the rand appreciates. In such cases
it is of vital importance that the accounting officer ensures that prices are
adjusted to the benefit of the Municipality / municipal entity.
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The ideal would be to find a balanced approach between the above
extremes, taking into account other contributing factors that will influence
the final price. According to proposals by the World Bank, price increases
based on ROE should not be allowed if the tenure of a contract is less
than 18 months. Due to the recent fluctuations of the Rand, this might be
a very long period when seen in the South African context and a period of
twelve months may be more appropriate. The local and imported
contents of the products under consideration will also have a vital impact
on the determining of prices. Another aspect that will also impact on the
determination of prices, will be the frequency of price adjustments. If the
contract allows for a monthly adjustment of prices, the provider hardly
bears any risk in this regard. Prescribing that price adjustments will only
be considered at prescribed intervals (say three monthly) will in a sense
split the risk between the State and the provider.
It is therefore suggested that the accounting officer, after thorough
analysis of relevant information, determine on a case-by-case basis the
optimum route to be followed for each commodity. It should, however, be
emphasised that price adjustments based on ROE fluctuations, should be
allowed only on the imported contents of the commodity and to meet only
the providers’ additional costs of the imported content.
It must be noted that price adjustments due to the fluctuation in the rate of
exchange (ROE) should indicate the dates and period of affect issued by
the Reserve Bank of South Africa at 12:00 of the specified date.
Contact Details: (01 2) 31 3 391 1 / 31 3 31 94 / 3929
http://www.resbank.co.za
Sureties
Bid securities are normally required from bidders in the construction and
engineering disciplines, as well as from auctioneers. The accounting
officer may decide whether bidders should supply securities at the bidding
phase. Bid security should not be set so high as to discourage bidders.
Bid security should remain valid for a period of four weeks beyond the
validity period for the bids, in order to provide reasonable time for the
municipality / municipal entity to act if the security is to be called. Should
the recommended bidder or the contractor withdraw his/her bid prior to
the award of the bid or commencement of the contract, the bidder/supplier
may forfeit his security to the municipality / municipal entity. Bid securities
should be released to unsuccessful bidders once it is determined that they
will not be awarded the contract.
Risk management procedures should determine the need for and form of
bid sureties. Risk should be allocated in the best interest of the state by
means of proper risk analyses and management. Each accounting officer
should decide whether the municipality / municipal entity or the supplier
should bear the risk.
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Whenever sureties are required, accounting officers should ensure that
the contents meet with legal requirements. For these inquiries the
Financial Services Board may be contacted on: Toll Free: 0800110 443 /
0800202087 & Call Centre: lnfo@fsb.co.za to establish whether or not a
company is a registered insurer.
Accounting officers should ensure that the correct contract amount (both
in amounts and in words) is quoted in any guarantee, together with the
description of the goods/service to be delivered and details of the
supplier/contractor. It is advisable to have guarantees perused by Legal
Advisors prior to acceptance to ensure that the contents are acceptable
and not qualified.
4.5.3 Inviting Bids
Prequalifying Bidders
(only when
necessary)
Pre-qualification is usually necessary for large or complex works, or in any
other circumstances in which the high costs of preparing detailed bids
could discourage competition, such as custom designed equipment,
industrial plant, specialized services and contracts to be let under turnkey,
design and build, or management contracting. This also ensures that
invitations to bid are extended only to those who have adequate
capabilities and resources. Pre-qualification may also be useful to
determine eligibility for preference for domestic contractors, when
appropriate. Pre-qualification should be based entirely upon the capability
and resources of prospective bidders to perform the particular contract
satisfactorily, taking into account their:
■ Capabilities with respect to personnel, equipment and construction or
manufacturing facilities; and
■ Financial position.
The invitation to pre-qualify should contain, at a minimum, the information
listed in ‘Bid content’, above.
The scope of the contract and a clear statement of the criteria for
qualification should be sent to those who responded to the invitation. All
applicants that meet the specified criteria should be allowed to bid. The
municipality / municipal entity should inform all applicants of the results of
pre-qualification. As soon as pre-qualification is completed, the bidding
documents should be made available to the qualified prospective bidders.
For pre-qualification for groups of contracts to be awarded over a period
of time, a limit for the number or total value of awards to any one bidder
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may be made on the basis of the bidder’s resources. The list of pre-
qualified firms in such instances should be updated periodically.
Verification of the information provided in the submission for pre-
qualification should be confirmed at the time of award of contract and
award may be denied to a bidder that is judged to no longer have the
capability or resources to successfully execute the contract.
Advertising Bids
Timely notification of bidding opportunities is essential in competitive
bidding.
Bids should be advertised for at least 14 days before closure in at least
the local media and the municipality / municipal entity’s website, and in
other appropriate media should an accounting officer deem it necessary
to ensure greater exposure to potential bidders except in urgent cases
when bids may be advertised for such shorter periods as the accounting
officer may determine.
For contracts above the value of R 10 million (VAT included), such period
may not be less than 30 days. The responsibility for such advertisement
costs will be that of the relevant accounting officer.
Also to be considered are the date, time and venue of any proposed site
meetings or briefing sessions.
The municipality / municipal entity should maintain a list of responses to
the advertisement. The related pre-qualification or bidding document, as
the case may be, should be available on the publication date of the
advertisement.
Sale of Documents
Accounting officers may decide to charge a refundable or non-refundable
fee for bidding documents if and when necessary, provided that:
• The fee should be reasonable and reflect only the cost of their printing
and delivery to prospective bidders;
• The fee should not be so high as to discourage prospective bidders;
and
• All monies received for the sale of bidding documents must be dealt
with in accordance with section 8(2) of the MFMA.
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4.5.4 Receiving Bid Responses
Opening of Bids
The time for the bid opening should be the same as for the deadline for
receipt of bids or promptly thereafter and should be announced, together
with the place for bid opening, in the invitation to bid. The municipality /
municipal entity should open all bids at the stipulated time and place.
Bids should be opened in public, that is, bidders or their representatives
should be allowed to be present. If requested by any bidder, the name of
the bidders and if practical the total amount of each bid and of any
alternative bids, should be read aloud. The names of the bidders and
their individual total prices should be recorded when bids are opened.
Late Bids
Bids received after the time stipulated should not be considered and be
returned unopened immediately.
Note: If the electronic bid was in time, but the hard copy was late, it is
considered that the bid was in time.
Clarification or
Alterations of Bids
Bidders should not be requested or permitted to alter their bids after the
deadline for receipt of bids. The accounting officer should only allow
questions be asked to bidders for clarification needed to evaluate their
bids but should not ask or permit bidders to change the substance or price
of their bids after bid opening. Requests for clarification and the bidder’s
responses should be made in writing.
Confidentiality
After public opening of bids, information relating to the examination,
clarification and evaluation of bids and recommendations concerning
awards should not be disclosed to bidders or other persons not officially
concerned with the process, until the successful bidder is notified of the
award.
Completeness of
Documentation
Normally it should be ascertained whether bids:
• include original tax clearance certificates;
• have been properly signed;
• are accompanied by the required securities;
• are substantially responsive to the bidding documents; and
• are otherwise generally in order.
If a bid is not substantially responsive, that is, it contains material
deviations from or reservations to the terms, conditions and specifications
in the bidding documents, it should not be considered further. The bidder
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should not be permitted to correct or withdraw material deviations or
reservations once bids have been opened.
4.5.5 Evaluating Bid Responses
4.5.5.1 Appointment of Bid Evaluation Committees
4. 5. 5. 1.1 The accounting officer should appoint a bid evaluation committee
for the evaluation of bids received for goods / works or services.
Where there is a lack of capacity (human resources) to establish
the committee structure in a specific municipality / municipal entity,
it may be agreed upon to share / utilize the committee structure of
another municipality/ municipal entity if and when required. The
accounting officer, who initiated the requirement, will be
accountable for the decisions taken.
4.5.5.2 Bid Evaluation Committee
4. 5. 5. 2.1 The bid evaluation committee should be cross functional and should
be composed of at least one supply chain management practitioner
and officials from the user departments requiring the goods and / or
services. The composition of the bid evaluation committee can
change to accommodate different scenarios. It is recommended
that the bid evaluation committee be constituted with different
members as that of the specification committee, and only where not
possible, the bid specification committee and the bid evaluation
committee have the same membership.
4. 5. 5. 2. 2 According to the prescripts of section 2 of the Preferential
Procurement Policy Framework Act, No. 5 of 2000 bids must be
evaluated in accordance with a preference point system. Any
specific goal for which a point may be awarded must be clearly
specified in the bid documentation.
4. 5. 5. 2. 3 This committee should evaluate all bids received and submit a
report and recommendation(s) regarding the final award of the
bid(s) to the adjudication committee.
4. 5. 5. 2. 4 No Councillor or official should be allowed to do any business with
the state. When a bidder declares in the bid documents that he /
she is in the employ of the State, the bid should not be considered.
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4. 5. 5. 2. 5 Other important issues to be considered by the evaluation
committee:
Evaluation and
Comparison of Bids
Bids should only be evaluated in terms of the criteria stipulated in
the bidding documents. Amending the evaluation criteria after
closure of the bids should not be allowed, as this would jeopardise
the fairness of the system. Points scored for price must be added
to points scored for goals and the contract is usually awarded to
the bidder who scores the highest points.
Rejection of all Bids
Bidding documents should provide for the rejection of all bids if and
when deemed necessary. This is justified when there is lack of
effective competition, or bids are not substantially responsive.
However, lack of competition should not be determined solely on
the basis of the number of bidders. If all bids were rejected, the
municipality / municipal entity should review the causes justifying
the rejection and consider making revisions to the specific
conditions of contract, design and specifications, scope of the
contract, or a combination of these, before inviting new bids.
If rejection is due to lack of competition, wider advertising should
be considered. If the rejection was due to most or all of the bids
being non responsive, new bids may be invited from the initially
pre-qualified firms, or with the agreement of the accounting officer,
from only those that submitted bids in the first instance.
All bids should not be rejected solely for the purpose of obtaining
lower prices. If the lowest evaluated responsive bid exceeds the
municipality / municipal entity’s pre-bid cost estimates by a
substantial margin, the municipality / municipal entity should
investigate causes for the excessive cost and consider requesting
new bids as described above.
Alternatively, the municipality / municipal entity may negotiate with
the identified preferred bidder to try to obtain a satisfactory contract
through a reduction in the scope and/or a reallocation of risk and
responsibility that can be reflected in a reduction of the contract
price. However, substantial reduction in the scope or modification
to the contract documents may require re-bidding.
The accounting officers’ prior agreement should be obtained before
rejecting all bids, soliciting new bids, or entering into negotiations
with the identified preferred bidder. This approval should be
recorded for auditing purposes.
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4 . 5.6
4 . 5 . 6.1
4.5. 6. 1.1
4.5. 6. 1.2
4.5.6. 1.3
4.5. 6. 1.4
Clearing Successful Bidders and Awarding Contracts
The Bid Adjudication Committee
The appointment of an adjudication committee should be cross-
functional of whom at least one member should be a supply chain
practitioner. The committee should be compiled of at least four
senior managers of the municipality or municipal entity and should
consider the report(s) and recommendation(s) made by the
evaluation committee. Depending on the delegations granted by
the accounting officer, the adjudication committee could make the
final award of the bid, or make a recommendation to the
accounting officer to make the final award. The accounting officer
must appoint the chairperson of the committee. In the absence of
the chairperson from a meeting, the members of the committee
who are present must elect one of them to preside at the meeting.
Where there is a lack of capacity (human resources) to establish
the committee structure in a specific municipality / municipal
entity, it may be agreed upon to share / utilize the committee
structure of another municipality/ municipal entity if and when
required. The accounting officer, who initiated the requirement,
will be accountable for the decisions taken.
The evaluation committee and adjudication committee should
comprise of different members to ensure that a transparent review
of the evaluation and award is undertaken. Members of evaluation
committees may present their reports to the bid adjudication
committee and clarify any uncertainties. Such members should,
however, not have any voting power on the adjudication
committee.
The bid specification, evaluation and adjudication process must be
within the ambit of section 217 of the Constitution as well as the
prescripts contained in the PPPFA and its associated regulations,
and the Broad-Based Black Economic Empowerment Act, No. 53
of 2003, and its associated regulations.
Other issues to be considered by the bid adjudication committee
include:
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Vendor assessment
Suppliers should be assessed by SCM practitioners, for possible
risks such as the availability of adequate facilities, financial
standing, capacity and capability to deliver, previous performance
in terms of quality and service delivery, as well as attainment of
goals.
Clearance of
bidders prior to the
award of a contract:
Restricted persons
Prior to the award of any contract, accounting officers should
ensure that neither the recommended bidder nor any of the
directors are listed as companies/directors/persons restricted to do
business with the public sector.
To confirm whether a bidder is listed on National Treasury’s
database, in terms of MSCM Regulations 38(1) (c), forward an e-
mail to Restrictions@treasurv.QOv.za.
In terms of MSCM Regulation 38 (1) (g) (iv), access to the ‘Register
for Tender Defaulters” will be active as from 01 November 2005.
Enter the National Treasury’s website, www.treasurv.aov.za, click
on the icon “Register for Tender Defaulters”.
Negotiations
Accounting officers or their delegates may negotiate the final terms
of contracts with bidders identified as preferred bidders through a
competitive bidding process, provided that such a process does not
allow the bidder concerned a second (unfair) opportunity and it is
not to the detriment of any other bidder. Minutes of such
negotiations must be kept for record purposes.
Contract Award
After approval of a bid, both parties should sign a written contract
or, if necessary, a service level agreement. Original/legal copies of
contracts should be kept in a secure place for judicial reference.
Contract
Administration
Contract administration, including monitoring of socio-economic
objectives as undertaken by the supplier during the bidding stage,
is the responsibility of the accounting officer.
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Notification and
release of
information
The following information on the successful bids should be made
available on the municipality / municipal entity website and, if so
decided by the Accounting Officer, also in the media where the bid
was originally advertised:
(i) Contract number and description;
(ii) Name(s) of the successful bidder(s), the contract price(s),
brands, delivery basis and where applicable, preferences
claimed.
Bids are not available for perusal by the public. Any bidder should,
when requesting it in writing, be provided with the reasons why his
/ her own bid was not successful. The reasons why another
bidder’s bid was unsuccessful should not be supplied, as this may
contain privileged information (e.g. a negative banking report). No
itemised prices other than the formal contract prices of the
successful bidder(s) should be supplied to competitors. According
to the prescripts of section 36 of the Promotion of Access to
Information Act, No. 2 of 2000, no information may be revealed
that will prejudice a third party in commercial competition.
Revealing itemised prices of unsuccessful bidders may reveal their
trade secrets / strategies and no such information should be
revealed without the written consent of the relevant bidder(s).
Cancellation of Bids
Regulation 10(4) of the Preferential Procurement Regulations,
2001 , prescribes that an organ of state may, prior to the award of a
bid, cancel the bid if:
(a) due to changed circumstances there is no longer a need for
the goods or services for which bids were solicited;
(b) funds are no longer available to cover the total envisaged
expenditure; or
(c) no acceptable bids were received.
Accounting officers are not authorised to deviate from these
prescripts.
E -procurement
The accounting officer must, prior to the request for information or
any bids regarding the introduction of an e-procurement system,
obtain approval from Council or Board of Directors to commence
with the establishment and maintaining of such a system.
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4.6 Flowcharts for Acquisition Management
LOCAL VERSUS INTERNATIONAL SOURCING
Yes
1
Source product
1
Notify international
1
Notify international community and
from a local
community of
local suppliers of opportunity to bid
supplier
1
opportunity
1
for specific contracts
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ACQUISITION PROCEDURES FOR PRICE QUOTATIONS
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ACQUISITION PROCEDURES FOR COMPETITIVE BIDDING
Objective: To provide all prospective bidders with timely and adequate notification of
an institution's requirements and an equal opportunity to bid for the required goods,
works or services.
Is value of required goods, works or services more than R200 000?
No Yes
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INVITATION OF BIDS
Compilation of
bidding documents
Must have enough
information for
prospective bidder
to prepare a bid for
the goods, works or
services to be
provided.
Compile own
checklist for bidding
document, which
can include:
•Invitation to bid
•Application for tax
clearance certificate
•Pricing schedule
•Declaration of
interest
•Relevant
preference claim
forms
•Technical
specifications
•General conditions
of contract
•Special conditions
determined by the
commodity
Language
Must be prepared in
at least English
All prospective bidders
should be provided the same
information and should be
assured of equal
opportunities to obtain
additional information on a
timely basis. Institutions
should provide reasonable
access to project sites for
visits by prospective bidders.
For works or complex supply
contracts, particularly for
those requiring refurbishing
existing works or equipment,
a pre-bid conference may be
arranged whereby potential
bidders may meet with the
institution' s representatives
to seek clarification.
Minutes of the meeting
should be provided to all
prospective bidders. Any
additional information,
clarification, correction of
errors, or modifications of
bidding documents should be
sent to each recipient of the
original bidding documents
in sufficient time before the
deadline for receipt of bids
to enable bidders to take
appropriate actions. If
necessary, the deadline
should be extended.
Clarity of bidding
documents
Must encourage
competition.
1
t
Must be clear and
precise on:
•work to be carried
out
•location of the
work
•goods to be
supplied
•place of delivery
•place of installation
•delivery schedule
•date of completion
•minimum
performance
requirements
•warranty
requirements
•maintenance
requirements
•any other pertinent
terms and
conditions
Must define:
tests, standards,
methods employed
to judge conformity
of:
equipment
delivered;
works as performed.
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STANDARD BID DOCUMENT SETTING
Bidding documents should ensure that all prospective bidders have an equal opportunity in being
awarded the contract. As such, it should ensure that the bidding document is very specific and
clear and that little is left to the interpretation of the applicant. The following check list could be
used to assist in this regard.
Yes
Yes
Yes
Yes
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CONDITIONS OF THE BID
All contracts must be based on the General Conditions of Contract (GCC), issued by the
National Treasury.
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CONDITIONS OF THE BID, continued
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5
Appointment of Consultants
5.1 Introduction
5.1.1 The purpose of this Chapter is to explain the procedures for
selecting, contracting, and monitoring consultants required for
projects. In general, the procedures described in the previous
chapter apply. Only the peculiarities of appointing consultants are
dealt with herein, as the services to which these procedures apply
are of an intellectual and advisory nature. These procedures do
not apply to general services such as construction works,
manufacture of goods, operation and maintenance of facilities or
plants, surveys, exploratory drilling, aerial photography, satellite
imagery, catering, cleaning and security in which the physical
aspects of the activity predominate. Appointment of consultants
for projects related to the construction industry must be in
accordance with the prescripts of the Construction Industry
Development Board.
5.1 .2 It must be clearly pointed out that the appointment of Transaction
Advisors in respect of public-private partnerships or part thereof,
should be done in terms of the provisions of section 120 of the
MFMA and the municipal PPP Regulations.
5.1.3 For the purpose of this Guide, the term consultant includes,
among others, consulting firms, management firms, procurement
agents, inspection agents, auditors, other multinational
organisations, investment and merchant banks, universities,
research agencies, government agencies, non-governmental
organisations (NGOs) and individuals.
5.1 .4 Accounting officers may use these organisations as consultants to
assist in a wide range of activities such as policy advice,
accounting officer’s reform management, financial services,
procurement services, social and environmental studies and
identification, preparation and implementation of projects to
complement accounting officers’ capabilities in these areas.
5.1.5 Consultants should only be engaged when the necessary skills
and/or resources to perform a project/duty/study are not available
and the accounting officer cannot be reasonably expected either
to train or to recruit people in the time available.
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5.1.6 The relationship between the accounting officer and the
consultant should be one of purchaser/supplier and not
employer/employee. The work undertaken by a consultant should
be regulated by a contract. The accounting officer is, however,
responsible for monitoring and evaluating contractor performance
and outputs against project specifications and targets and should
take remedial action if performance is below standard.
5.2 Applicability of Procedures
5.2.1 The procedures outlined herein apply to all contracts for
consulting services. In procuring consulting services, the
accounting officer should satisfy himself/herself that:
■ the procedures to be used will result in the selection of
consultants who have the necessary professional
qualifications;
■ the selected consultant will carry out the assignment in
accordance with the agreed schedule, and
■ the scope of the services is consistent with the needs of the
project; and
5.3 General Approach
5.3.1 The accounting officer should be responsible for preparing and
implementing the project, for selecting the consultant, awarding
and subsequently administering the contract. While the specific
rules and procedures to be followed for selecting consultants
depend on the circumstances of the particular case, at least the
following four major considerations should guide the accounting
officer’s policy on the selection process:
■ the need for high-quality services;
■ the need for economy and efficiency;
■ the need to give qualified consultants an opportunity to
compete in providing the services; and
■ the importance of transparency in the selection process.
5.3.2 In the majority of cases, these considerations can best be
addressed through competition among firms in which the selection
is based both on the quality of the services to be rendered and on
the cost of the services to be provided (Quality- and Cost-Based
Selection [QCBS]) as described in section 5.8.3. However, there
are cases when QCBS is not the most appropriate method of
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selection. For complex or highly specialized assignments or those
that invite innovations, selection based on the quality of the
proposal alone (Quality-Based Selection [QBS]), would be more
appropriate. Other methods of selection and the circumstances in
which they are appropriate are outlined in section 5.9.
5.3.3 The particular method to be followed for the selection of
consultants for any given project should be selected by the
accounting officer in accordance with the criteria outlined in this
guide.
5.3.4 When appropriate, the accounting officer may include under the
special conditions of contract, the following or similar condition:
“A service supplier may not recruit or shall not attempt to recruit
an employee of the principal for purposes of preparation of the bid
or for the duration of the execution of this contract or any part
thereof”.
5.4 Conflict of Interest
5.4.1 Consultants are required to provide professional, objective and
impartial advice and at all times hold the client’s interests
paramount, without any consideration for future work and strictly
avoid conflicts with other assignments or their own corporate
interests. Consultants should not be hired for any assignment that
would be in conflict with their prior or current obligations to other
clients, or that may place them in a position of not being able to
carry out the assignment in the best interest of the State. Without
limitation on the generality of this rule, consultants should not be
hired under the following circumstances:
• A firm, which has been engaged by the accounting officer to
provide goods or works for a project and any of its affiliates,
should be disqualified from providing consulting services for
the same project. Similarly, a firm hired to provide consulting
services for the preparation or implementation of a project and
any of its affiliates, should be disqualified from subsequently
providing goods or works or services related to the initial
assignment (other than a continuation of the firm’s earlier
consulting services as described below) for the same project,
unless the various firms (consultants, contractors, or suppliers)
are performing the contractor’s obligations under a turnkey or
design-and-build contract;
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• Consultants or any of their affiliates should not be hired for any
assignment that, by its nature, may be in conflict with another
assignment of the consultants. As an example, consultants
hired to prepare an engineering design for an infrastructure
project should not be engaged to prepare an independent
environmental assessment for the same project, and
consultants assisting a client in the privatization of public
assets should not purchase, nor advise purchasers of such
assets.
5.5 Associations between Consultants
5.5.1 Consultants may associate with each other to complement their
respective areas of expertise, or for other reasons. Such an
association may be for the long term (independent of any
particular assignment) or for a specific assignment. The
“association” may take the form of a joint venture or a sub-
consultancy. In case of a joint venture, all members of the joint
venture should sign the contract and are jointly and severally
liable for the entire assignment. Once the bids or Requests for
Proposals (RFPs) from service suppliers are issued, any
association in the form of joint venture or sub-consultancy among
firms should be permissible only with the approval of the
accounting officer or his/her delegate. Accounting officers should
not compel consultants to form associations with any specific firm
or group of firms, but may encourage associations with the aim to
enhance transfer of skills.
5.6 Promoting Government’s Preferential Policies
5.6.1 When consultants are appointed, the prescripts of the Preferential
Procurement Regulations, 2001 , must be adhered to.
5.7 Training or Transfer of Knowledge and Skills
5.7.1 If the assignment includes an important component for training or
transfer of knowledge and skills, the Terms of Reference (TOR)
should indicate the objectives, nature, scope and goals of the
training programme, including details of trainers and trainees,
skills to be transferred, time frames and monitoring and evaluation
arrangements. The cost for the training programme should be
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included in the consultant’s contract and in the budget for the
assignment.
5.8 Steps to follow when selecting consultants
5.8.1 The four stages of selection
5. 8. 1.1 There are essentially four distinct stages in the recommended
selection process:
• Identify the approach;
• Invite bids/proposals;
• Receive responses; and
• Evaluate responses.
5. 8. 1.2 Other aspects of appointment (such as advertising, opening of
proposals) are no different from those set out in Chapter 4 of this
guide.
5.8.1 .3 Each of the four stages above is described in the sections below.
5.8.2 Identify the Approach
5.8.2. 1 Various approaches may be followed in selecting consultants. As
stated earlier, in most instances, ‘Quality and cost based
selection’ (QCBS) is recommended. However, other possibilities
are:
• Quality based selection;
• Selection under a fixed budget;
• Least cost selection; and
• Single source selection.
5. 8. 2. 2 In determining the most appropriate approach, it may be useful to
ask: What sort of Consultancy do I require? Is it for: -
An assignment that is not complex or
Use ‘Quality and Cost
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specialised
Based Selection’ (QCBS)
A complex or highly specialized assignment,
for which consultants are expected to
demonstrate innovation in their proposals (for
example, financial sector reforms)
Use ‘Quality-Based
Selection’ (QBS)
An assignment that has a high downstream
impact and requires the best available
experts (for example, management studies of
large government agencies)
Use QBS
An assignment that could be carried out in
substantially different ways, hence proposals
will not be comparable (for example, sector
and policy studies in which the value of the
services depends on the quality of the
analysis)
Use QBS
A simple assignment, which is precisely
defined and the budget fixed
Use ‘Selection under a
fixed budget’, but
evaluate technical
proposals first as in
QCBS
A standard or routine assignment (e.g. an
audit, engineering design of noncomplex
works)
Use ‘Least-cost selection’
Potential suppliers may
be obtained from the list
of approved service
suppliers.
A very small assignment, which does not
justify the preparation and evaluation of
competitive proposals.
Selection based on
consultant’s qualifications
as detailed in paragraph
5.9.4. Potential suppliers
may be obtained from the
list of pre-qualified firms.
A task that represents a natural continuation
of previous work carried out by the firm
Use ‘Single-source
selection
An emergency operation
You MAY use ‘Single
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source selection.’
An assignment where only one firm is
qualified or has experience of exceptional
worth for the assignment
Use ‘Single-source
selection’
Any other situation: Quality and Cost Based
Selection (QCBS)
Use ‘Quality and Cost
Based Selection’, either
by requesting a “BID” or
a “PROPOSAL”
5.8.3
Invite bids/proposals, using QCBS
5.8.3.1
Request for bids
5.8.3. 1.1
The following steps would generally be followed in
consultants where a clear Terms of Reference (TOR),
detailed task directive has been compiled and the
goals and scope of the assignment are clearly defined:
appointing
including a
objectives,
Preparation of the
“Terms of Reference”
(TOR)
The accounting officer should prepare the TOR.
The scope of the services described should be
compatible with the available budget. The TOR
should define clearly the task directive
(methodology), objectives, goals and scope of
the assignment and provide background
information, including a list of existing relevant
studies and basic data, to facilitate the
consultants’ preparation of their bids.
Time frames linked to various tasks should be
specified, as well as the frequency of monitoring
actions. The respective responsibilities of the
accounting officer and the consultant should be
clearly defined.
The evaluation criteria, their respective weights,
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the minimum qualifying score for functionality
and the values that will be applied for evaluation
should be clearly indicated. The evaluation
criteria should include at least the following:
• Consultant’s experience relevant to
assignment;
• The quality of the methodology;
• The qualifications of key personnel; and
• The transfer of knowledge (where
applicable).
In more complicated projects, provision may
also be made for pre-bid briefing sessions or
presentations by bidders as part of the
evaluation process.
A clear indication should be given of which
preference point system in terms of the PPPFA
and its associated Regulations will be
applicable.
Detailed information on the evaluation process
should be provided by firstly indicating the ratio
of percentage between functionality and price.
The percentage for price should be determined
taking into account the complexity of the
assignment and the relative importance of
functionality. The percentage for price should
normally be determined and approved by the
accounting officer or his/her delegate prior to
finalising the TOR.
If transfer of knowledge or training is an
objective, it should be specifically outlined along
with details of number of staff to be trained, etc.,
to enable consultants to estimate the required
resources. The TOR should list the services
and surveys necessary to carry out the
assignment and the expected outputs (for
example reports, data, maps, surveys, etc),
where applicable.
Evaluation criteria could be divided into sub-
criteria.
Preparation of a well-thought-through cost
estimate is essential if realistic budgetary
resources are to be earmarked. The cost
estimate should be based on the accounting
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officer’s assessment of the resources needed to
carry out the assignment such as staff time,
logistical support and physical inputs (i.e.
vehicles, laboratory equipment, etc). The cost
of staff time should be estimated on a realistic
basis for foreign and local personnel.
The TOR should specify the validity period
(normally 60 - 90 days).
The TOR should form part of the standard bid
documentation. At this stage the evaluation
panel, consisting of at least three members who
are demographically representative in terms of
race, gender and expertise, should also be
selected and finalised.
5.8.3.2 Request for Proposals
5. 8. 3. 2.1 This method should be followed where selection is based both on
the quality of a proposal and on the cost of the service through
competition among firms. This method will be applicable on more
complex projects where consultants are requested and
encouraged to propose their own methodology and to comment
on the TOR in their proposals.
Preparation and
issuance of ‘Request
for Proposals’ (RFP)
Whenever possible, accounting officers should
include at least the following documents in the
RFP:
• Letter of Invitation;
• Information to Consultants;
• the TOR; and
• the Proposed Contract.
Letter of invitation
(LOI)
The LOI should state the intention to enter into
a contract for the provision of consulting
services, the details of the client and the date,
time and address for submission of proposals.
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Information to
Consultants (ITC)
The ITC should contain all necessary
information that would assist consultants to
prepare responsive proposals. It should be
transparent and provide information on the
evaluation process by indicating the evaluation
criteria and factors and their respective weights
and the minimum qualifying score for
functionality. A clear indication should be given
of which preference points system will be
applicable in terms of the PPPFA and its
Regulations. The budget is not specified (since
cost is a selection criterion), but should indicate
the expected input of key professionals (staff
time). Consultants, however, should be free to
prepare their own estimates of staff time
necessary to carry out the assignment. The ITC
should specify the proposal validity period
(normally 60-90 days). A detailed list of the
information that should be included in the ITC is
given in section 5.14.
Terms of Reference
A specialist in the area of the assignment
should compile the TOR and the scope of
services described should be compatible with
the available budget. The TOR should define
as clearly as possible the objectives, goals and
scope of the assignment including background
information to facilitate the consultant in the
preparation of its proposal. The TOR should be
compiled in such a manner that consultants are
able to propose their own methodology and
staffing and be encouraged to comment on the
TOR in their proposals.
Depending on the circumstances, it may be
indicated that proposals should be submitted in
two separate clearly marked envelopes, one
containing the technical proposal and the other
the cost for the assignment.
In cases where pre-qualification / shortlisting is
required, the TOR should indicate the basis of
pre-qualification / shortlisting, for instance the
number of minimum points to be scored to pre-
qualify.
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Contract
Accounting officers should use the appropriate
Standard Form of Contract (MBD 7.2) issued by
the National Treasury. Any changes necessary
to address specific project issues should be
introduced through Contract Data Sheets or
through Special Conditions of Contract and not
by introducing changes in the wording of the
General Conditions of Contract included in the
Standard Form. When these forms are not
appropriate (for example, for pre-shipment
inspection, training of students in universities,),
accounting officers should use other acceptable
contract forms.
5.8.4 Receipt of Proposals
5.8.4. 1 The accounting officer should allow enough time for consultants to
prepare their proposals. The time allowed should depend on the
assignment, but normally should not be less than four weeks or
more than three months (for example, for assignments requiring
establishment of a sophisticated methodology, preparation of a
multidisciplinary master plan). During this interval, the firms may
request clarification about the information provided in the RFP.
The accounting officer should provide clarification in writing and
copy them to all firms who intend to submit proposals. If
necessary, the accounting officer should extend the deadline for
submission of proposals. The technical and financial proposals
should be submitted at the same time. No amendments to the
technical or financial proposal should be accepted after the
deadline. To safeguard the integrity of the process, the technical
and financial proposals should be submitted in separate sealed
envelopes. The technical envelopes should be opened
immediately after the closing time for submission of proposals.
The financial proposals should remain sealed until they are
opened publicly. Any proposal received after the closing time for
submission of proposals should be returned unopened.
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5.8.5 Evaluation of bids/proposals
5.8.5. 1 Within the ambit of the Preferential Procurement Regulations,
2001, bids/ proposals for the appointment of consultants should
be evaluated on the basis of functionality and price as well as the
achievement of specified RDP goals. The evaluation should be
carried out in two phases - first the functionality and then the
price. The combined percentages allocated for functionality and
price should total to 100%. The ratio to be used for the division
between functionality and price should be determined and
approved by the accounting officer and should be made known
up-front in the bid documents. Score sheets should be prepared
and provided to panel members to evaluate the bids on
functionality. In view of impartiality, members of bid committees
should not also act as panel members.
5. 8. 5. 2 The score sheet should contain all the criteria and the weight for
each criterion as indicated in the TOR as well as the values to be
applied for evaluation. Each panel member should after thorough
evaluation award his/her own value to every criterion without
discussing any aspect of any bid with any of the other members.
Under no circumstances may additional evaluation criteria be
added to those originally indicated in the bid documentation nor
may the evaluation criteria be amended or omitted after closing of
the bid. Score sheets should be signed by panel members and if
required, written motivation could be requested from panel
members in the event of vast discrepancies in the values awarded
for each criterion.
5.8.6 Calculation of Percentage for Functionality
5.8.6. 1 The percentage scored for functionality should be calculated as
follows:
Each panel member should award values for each individual
criterion on a score sheet. The value scored for each criterion
should be multiplied with the specified weighting for the relevant
criterion to obtain the marks scored for the various criteria. These
marks should be added to obtain the total score. The following
formula should then be used to convert the total score to a
percentage for functionality:
Ms
where
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Ps = percentage scored for functionality by bid/proposal under
consideration
So = total score of bid/proposal under consideration
Ms = maximum possible score
Ap = percentage allocated for functionality
The percentages of each panel member should be added together
and divided by the number of panel members to establish the
average percentage obtained by each individual bidder for
functionality.
After calculation of the percentage for functionality, the prices of
all bids that obtained the minimum score for functionality should
be taken into consideration.
Bids/proposals that do not score a certain specified minimum
percentage for functionality should be disqualified and not be
considered further.
5.8.7 Calculation of Percentage for Price
The percentage scored for price should be calculated as follows:
The lowest acceptable bid/proposal will obtain the maximum
percentage allocated for price. The other bids/proposals with
higher prices will proportionately obtain lower percentages based
on the following formula:
Ps =
P min
Pt
X Ap
where
Ps = percentage scored for price by bid/proposal under
consideration
Pmin = lowest acceptable bid/proposal
Pt = price of bid/proposal under consideration
Ap = percentage allocated for price
5.8.8 Calculation of Points for Functionality and Price
The percentages obtained for functionality should be added to the
percentage obtained for price to obtain a percentage out of 100
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that in turn should be converted to points out of 80 or 90 in terms
of Regulation 8 of the Preferential Procurement Regulations.
The points scored out of 80 or 90 should be calculated according
to the following formula:
(i) The 80/20 preference point system
Ps = 80(1 -
Hs-Rs
Rs
)
(ii) The 90/1 0 preference point system
Ps = 90(1 -
Hs - Rs
Rs
)
where
Ps = points scored for functionality and price of the bid/proposal
under consideration
Hs = highest percentage scored by any acceptable bidder for
functionality and price
Rs = percentage scored for functionality and price by bid/proposal
under consideration
Points scored for achieving Government’s Broad-Based Black
Economic Empowerment objectives as contemplated by the
PPPFA and its Regulations are then calculated separately and
added to the points scored for price and functionality in order to
obtain a final point. The contract should be awarded to the bidder
scoring the highest points.
Information relating to evaluation of bids and recommendations
concerning awards should not be disclosed to the consultants who
submitted bids or to other persons not officially concerned with the
process until the successful consultant is notified.
Evaluation
of
The evaluation of the proposals should be carried
technical
out in two stages: first the functionality (quality) and
proposals
then the price.
(Functionality)
The evaluation should be carried out in full
conformity with the provisions of the RFP.
When the two-envelope system is used:
Evaluators of technical proposals should not have
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access to the financial proposals until the technical
evaluation is concluded. Financial proposals should
be opened only after the technical evaluation and
only in respect of those proposals that achieved the
minimum qualifying score for functionality. In
respect of functionality, the accounting officer
should evaluate each technical proposal (using an
evaluation panel of three or more specialists in that
field of expertise) in terms of the specified
evaluation criteria that may include the following:
• The consultant’s relevant experience for the
assignment;
• The quality of the methodology proposed;
• The qualifications of the key staff proposed;
and
• Transfer of knowledge.
The accounting officer should normally divide these
criteria into sub-criteria; for example, the sub-criteria
under methodology might be innovation and level of
detail.
More weight should be given to the methodology in
the case of more complex assignments for example
multidisciplinary feasibility or management studies.
Evaluation of only “key” personnel is recommended
as they ultimately determine the quality of
performance. More weight should be assigned to
this criterion if the proposed assignment is complex.
The accounting officer should review the
qualifications and experience of proposed key
personnel in their curricula vitae which should be
accurate, complete and signed by an authorised
official of the consultant and the individual
proposed. When the assignment depends critically
on the performance of key staff, such as a Project
Manager in a large team of specified individuals, it
may be desirable to conduct interviews. The
individuals can be rated, among others, in the
following sub-criteria as relevant to the assignment:
General qualifications: general education and
training, length of experience, positions held, time
with the consulting firm staff, and experience in
developing countries;
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Adequacy for the assignment: education, training
and experience in that specific sector, field or
subject relevant to the particular assignment; and
Experience in the region: knowledge of the local
language, culture, administrative system,
government organization, etc.
Accounting officers should evaluate each proposal
on the basis of its response to the TOR. A proposal
should be rejected at this stage if it does not
respond to important aspects of the TOR or it fails
to achieve the minimum qualifying score for
functionality as specified in the RFP.
At the end of the process, the accounting officer
should prepare an evaluation report on the quality
of the proposals. The report should substantiate
the results of the evaluation and describe the
relative strengths and weaknesses of the proposals.
All records relating to the evaluation such as
individual score sheets should be retained until
completion of the project and its audit.
Evaluation of
financial proposal
For the purpose of evaluation, the price shall
include all local taxes and other reimbursable
expenses such as travel, translation, report printing
or secretarial expenses. The proposal with the
lowest price will obtain the maximum percentage for
price as prescribed in the RFP. Proposals with
higher prices will proportionately obtain lower
percentages according to the method as prescribed
in the RFP.
Negotiations and
award of contract
The Accounting Officer may negotiate the contract
only with the preferred bidder identified by means of
the competitive bidding process.
Negotiations should include discussions of the
TOR, the methodology, staffing, accounting officer’s
inputs, and special conditions of the contract.
These discussions should not substantially alter the
original TOR or the terms of the contract,
compromise the quality of the final product, its cost,
and the relevance of the initial evaluation. Major
reductions in work inputs should not be made
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solely to meet the budget. The final TOR and the
agreed methodology should be incorporated in
“Description of Services,” which should form part of
the contract.
The selected firm should not be allowed to
substitute key staff, unless both parties agree that
undue delay in the selection process makes such
substitution unavoidable or that such changes are
critical to meet the objectives of the assignment. If
this is not the case and if it is established that key
staff were offered in the proposal without confirming
their availability, the firm may be disqualified and
the process continued with the next ranked firm.
The key staff proposed for substitution should have
qualifications equal to or better than the key staff
initially proposed.
Proposed unit rates for staff-months and re-
imbursables should not be negotiated, since these
have already been a factor of selection in the cost
of the proposal, unless there are exceptional
reasons.
If the negotiations fail to result in an acceptable
contract, the accounting officer should terminate the
negotiations and invite the next ranked firm for
negotiations. The original preferred consultant
should be informed of the reasons for termination of
the negotiations. Once negotiations are
commenced with the next ranked firm, the
accounting officer should not reopen the earlier
negotiations. After negotiations are successfully
completed, the accounting officer should promptly
notify other firms that they were unsuccessful.
Contract award
According to the prescripts of the PPPFA and its
Regulations, a contract may only be awarded to the
bidder who scored the highest number of points,
unless objective criteria justify the award to another
bidder. Should this be the case, the accounting
officer should be able to defend the decision not to
award the bid to the bidder who scored the highest
number of points in any court of law. It should be
emphasized that not offering any contributions to
prescribed goals as contemplated in the Preferential
Procurement Regulations, 2001, does not disqualify
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a bidder. Under these circumstances a bidder will
score no points for the specified goals.
The accounting officer should award the contract,
within the period of the validity of bids, to the bidder
who meets the appropriate standards of capability
and resources and whose bid has been determined:
• to be substantially responsive to the bidding
documents; and
• to be the highest on points.
A bidder should not be required, as a condition of
award, to undertake responsibilities for work not
stipulated in the bidding documents or otherwise to
modify the bid as originally submitted.
Rejection of all
proposals and re-
invitation
The accounting officer will be justified in rejecting all
proposals only if all proposals are non-responsive
and unsuitable, either because they present major
deficiencies in complying with the TOR, or because
they involve costs substantially higher than the
original estimate. In the latter case, the feasibility of
increasing the budget, or scaling down the scope of
services with the firm should be investigated. The
new process may include revising the RFP and the
budget.
5.9 Other Methods of Selection
5.9.1 Quality-Based Selection (QBS)
5.9.1 .1 QBS is appropriate for the following types of assignments:
• complex or highly specialized assignments for which it is
difficult to define precise TOR and the required input from the
consultants and for which the client expects the consultants to
demonstrate innovation in their proposals (for example,
country economic or sector studies, multi-sectoral feasibility
studies, design of a hazardous waste remediation plant or of
an urban master plan, financial sector reforms);
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• assignments that have a high downstream impact and in which
the objective is to have the best experts (for example,
feasibility and structural engineering design of such major
infrastructure as large dams, policy studies of national
significance, management studies of large government
agencies); and
• assignments that can be carried out in substantially different
ways, such that proposals will not be comparable (for example,
management advice and sector and policy studies in which the
value of the services depends on the quality of the analysis).
5. 9. 1.2 In QBS, the RFP may request submission of a technical proposal
only (without the financial proposal), or request submission of both
technical and financial proposals at the same time, but in separate
envelopes (two-envelope system). The RFP should not disclose
the estimated budget, but it may provide the estimated number of
key staff time, specifying that this information is given as an
indication only and that consultants are free to propose their own
estimates.
5. 9. 1.3 If technical proposals alone were invited, after evaluating the
technical proposals using the same methodology as in QCBS, the
accounting officer should request the consultant with the highest
ranked technical proposal to submit a detailed financial proposal.
The accounting officer and the consultant should then negotiate
the financial proposal and the contract. All other aspects of the
selection process should be identical to those of QCBS. If,
however, consultants were requested to provide financial
proposals initially together with the technical proposals,
safeguards should be built in to ensure that the price envelope of
only the selected proposal is opened and the rest returned
unopened, after the negotiations are successfully concluded.
5.9.2 Selection under a fixed budget
5.9.2. 1 This method is appropriate only when the assignment is simple
and can be precisely defined and when the budget is fixed. The
RFP should indicate the available budget and request the
consultants to provide their best technical and financial proposals
in separate envelopes, within the budget. The TOR should be
particularly well prepared to ensure that the budget is sufficient for
the consultants to perform the expected tasks. Evaluation of all
technical proposals should be carried out first as in the QCBS
method, where after the price envelopes should be opened in
public. Proposals that exceed the indicated budget should be
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5.9.3
5 . 9 . 3. 1
5.9.4
5 . 9 . 4. 1
5.9.5
5 . 9 . 5. 1
rejected. The consultant who has submitted the highest ranked
technical proposal should be selected and invited to negotiate a
contract.
Least-cost selection
This method is more appropriate to selection of consultants for
assignments of a standard or routine nature (audits, noncomplex
projects, and so forth) where well-established practices and
standards exist and in which the contract amount is small. Under
this method, a “minimum” qualifying mark for the “functionality” is
established. Proposals to be submitted in two envelopes are
invited. Technical envelopes are opened first and evaluated.
Those securing less than the minimum mark should be rejected
and the financial envelopes of the rest are opened in public. The
firm with the highest points should then be selected. Under this
method, the qualifying minimum mark should be established,
keeping in view that all proposals above the minimum compete
only on “cost” and promotion of HDIs and RDP objectives. The
minimum mark to qualify should be stated in the RFP.
Selection based on consultants’ qualifications
This method may be used for very small assignments for which
the need for preparing and evaluating competitive proposals is not
justified. In such cases, the accounting officer should prepare the
TOR, request expressions of interest and information on the
consultants’ experience and competence relevant to the
assignment and select the firm with the most appropriate
qualifications and references. The selected firm should be
requested to submit a combined technical-financial proposal and
then be invited to negotiate the contract.
Single-source selection
Single-source selection of consultants does not provide the
benefits of competition in regard to quality and cost and lacks
transparency in selection and could encourage unacceptable
practices. Therefore, single-source selection should be used only
in exceptional cases. The justification for single-source selection
should be examined in the context of the overall interests of the
client and the project.
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5. 9. 5. 2 Single-source selection may be appropriate only if it presents a
clear advantage over competition:
• for tasks that represent a natural continuation of previous
work carried out by the firm;
• where a rapid selection is essential (for example, in an
emergency operation);
• for very small assignments; or
• when only one firm is qualified or has experience of
exceptional worth for the assignment.
5. 9. 5. 3 The reasons for a single-source selection should be recorded and
approved by the accounting officer or his / her delegate prior to
the conclusion of a contract.
5. 9. 5. 4 When continuity for downstream work is essential, the initial RFP
should outline this prospect and if practical, the factors used for
the selection of the consultant should take the likelihood of
continuation into account. Continuity in the technical approach,
experience acquired and continued professional liability of the
same consultant may make continuation with the initial consultant
preferable to a new competition, subject to satisfactory
performance in the initial assignment. For such downstream
assignments, the accounting officer should ask the initially
selected consultant to prepare technical and financial proposals
on the basis of TOR furnished by the accounting officer, which
should then be negotiated.
5. 9. 5. 5 If the initial assignment was not awarded on a competitive basis or
was awarded under tied financing or reserved procurement or if
the downstream assignment is substantially larger in value, a
competitive process acceptable to the accounting officer should
normally be followed in which the consultant carrying out the initial
work is not excluded from consideration if it expresses interest.
5. 9. 5. 6 Where, in exceptional instances, it is impractical to appoint the
required consultants through a competitive bidding process and a
South African based consultant is used, the Guidelines on Hourly
Fee Rates for Consultants issued by the Department of Public
Service and Administration may be used as a benchmark to
establish the appropriate tariffs, or to determine the
reasonableness of the tariffs.
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5.9.6 Selection of individual consultants
5.9.6. 1 Individual consultants may normally be employed on assignments
for which:
• teams of personnel are not required;
• no additional outside (home office) professional support is
required; and
• the experience and qualifications of the individual are the
paramount requirement.
5. 9. 6. 2 When co-ordination, administration, or collective responsibility
may become difficult because of the number of individuals, it
would be advisable to employ a firm.
5. 9. 6. 3 Individual consultants should be selected on the basis of their
qualifications for the assignment. They may be selected on the
basis of references or through comparison of qualifications among
those expressing interest in the assignment or approached
directly by the accounting officer. Individuals employed by the
accounting officer should meet all relevant qualifications and
should be fully capable of carrying out the assignment. Capability
is judged on the basis of academic background, experience and
as appropriate, knowledge of the local conditions, such as local
language, culture, administrative system and government
organization.
5. 9. 6. 4 From time to time, permanent staff or associates of a consulting
firm may be available as individual consultants. In such cases,
the conflict of interest provisions described in these guidelines
should apply to the parent firm.
5.9.7 Selection of particular types of consultants
5.9.7. 1 Use of Nongovernmental Organizations (NGOs). NGOs are
voluntary non-profit organizations that may be uniquely qualified
to assist in the preparation, management, and implementation of
projects, essentially because of their involvement and knowledge
of local issues, community needs, and/or participatory
approaches. NGOs may be included in the short list if they
express interest and provided that the accounting officer is
satisfied with their qualifications. For assignments that emphasize
participation and considerable local knowledge, the short-list
entirely NGOs. If so, the QCBS procedure should be followed and
the evaluation criteria should reflect the unique qualifications of
NGOs, such as voluntarism, non-profit status, local knowledge,
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scale of operation, and reputation. An accounting officer may
select the NGO on a single-source basis, provided the criteria
outlined for single source selection are fulfilled.
5. 9. 7. 2 Inspection Agents. Accounting officers may wish to employ
inspection agencies to inspect and certify goods prior to shipment
or on arrival in the country. The inspection by such agencies
usually covers the quality and quantity of the goods concerned
and reasonableness of price. Inspection agencies should be
registered with the South African National Accreditation System
(SANAS) and the services of these inspection agents should be
obtained by means of competitive bidding.
5. 9. 7. 3 Banks. Investment and commercial banks, financial firms, and
fund managers hired by accounting officers for the sale of assets,
issuance of financial instruments and other corporate financial
transactions, notably in the context of privatization operations,
should be selected under QCBS. The RFP should specify
selection criteria relevant to the activity — for example,
experience in similar assignments or network of potential
purchasers — and the cost of the services. In addition to the
conventional remuneration (called a “retainer fee”), the
compensation includes a “success fee.” This fee can be fixed, but
is usually expressed as a percentage of the value of the assets or
other financial instruments to be sold. The RFP should indicate
that the cost evaluation will take into account the success fee,
either in combination with the retainer fee or alone. If alone, a
standard retainer fee should be prescribed for all short-listed
consultants and indicated in the RFP, and the financial scores
should be based on the success fee as a percentage of a pre-
disclosed notional value of the assets. For the combined
evaluation (notably for large contracts), cost may be accorded a
weight higher or the selection may be based on cost alone among
those who secure a minimum passing mark for the quality of the
proposal. The RFP should specify clearly how proposals will be
presented and how they will be compared.
5. 9. 7. 4 Auditors. Auditors typically carry out auditing tasks under well-
defined TOR and professional standards. They should be
selected according to QCBS, with cost as a substantial selection
factor (40-50 points), or by the “Least-Cost Selection.” When
consultants are appointed to execute an audit function on behalf
of the accounting officer, the tariffs agreed by the Auditor-General
and the South African Institute for Chartered Accountants (SAICA)
may be used as a guideline to determine the appropriate tariff or
to determine the reasonableness of the tariffs. These tariffs can
be obtained from SAICA’s website under www.saica.co.za. These
tariffs are captured in a circular, which can be accessed on
SAICA’s webpage under publications in the media centre icon.
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5. 9. 7. 5 “Service Delivery Contractors.” Projects in the social sectors in
particular may involve hiring of large numbers of individuals who
deliver services on a contract basis (for example, social workers,
nurses and paramedics). The job descriptions, minimum
qualifications, terms of employment and selection procedures
should be described in the project documentation.
5.10 Establishment of a List of Approved Service
Suppliers
5.10.1 Where consultancy services are required on a recurring basis, a
panel of consultants/list of approved service suppliers for the
rendering of these services may be established. These
panels/lists should be established through the competitive bidding
process, usually for services that are of a routine or simple nature
where the scope and content of the work to be done can be
described in detail.
5.10.2 The intention to establish a panel/list of approved service
suppliers is published in locally distributed news media and the
municipality / municipal entity’s website. The closing time and date
for inclusion in the panel/list of approved service suppliers should
be indicated. For this purpose, a questionnaire should be made
available and should make provision for the following:
Full details of the service supplier, among others:
• composition of the firm in terms of shareholding;
• personnel complement;
• representation of expertise in respect of the disciplines
required, e.g. accounting, legal, educational, engineering,
computer, etc.;
• national / international acceptability of experts in the various
professions;
• experience as reflected in projects already dealt with; and
• financial position.
Requirements for admission to the list and criteria should be
linked to the numeric value in terms of which applicants will be
measured, for example qualifications, experience, acceptability,
facilities and resources, etc. A pre-determined standard method
of awarding points should be followed.
5.10.3 The applications received should be evaluated and any rejection
of applicants should be motivated and recorded.
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5.10.4 Once the panel/list of service suppliers has been approved, only
the successful applicants are approached, depending on the
circumstances, either by obtaining quotes on a rotation basis, or
according to the bid procedure when services are required, with
the exception that the requirement is not advertised again.
5.10.5 This list should be updated continuously, at least quarterly.
5.1 1 Evaluation of the Performance of Consultants
5.11.1 Consultants should observe due diligence and prevailing
standards in the performance of the assignment. The accounting
officer should evaluate the performance of consultants appointed
in a fair and confidential process. In the case of repeated poor
performance, the firm should be notified and provided an
opportunity to explain the reasons for it and the remedial action
proposed.
5.1 1 .2 Consultants should be responsible for the accuracy and suitability
of their work. Although accounting officers supervise and review
the consultants’ work, no modifications should be made in the final
documents prepared by the consultants without mutual
agreement. In the case of supervision of works, consultants may
have more or less authority to supervise, from full responsibility as
an independent engineer, to that of advisor to the client with little
authority to make decisions, as determined by the accounting
officer and captured in the contract agreement between the
accounting officer and the consultant.
5.12 Types of Contracts for Consultants
5.12.1 Lump Sum (Firm Fixed Price) Contract: Lump sum contracts are
used mainly for assignments in which the content and the duration
of the services and the required output of the consultants are
clearly defined. They are widely used for simple planning and
feasibility studies, environmental studies, detailed design of
standard or common structures, preparation of data processing
systems, and so forth. Payments are linked to outputs
(deliverables), such as reports, drawings, bills of quantities,
bidding documents and software programs. Lump sum contracts
are easy to administer because payments are due on clearly
specified outputs.
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5.12.2 Time-Based Contract: This type of contract is appropriate when it
is difficult to define the scope and the length of services, either
because the services are related to activities by others for which
the completion period may vary, or because the input of the
consultants required to attain the objectives of the assignment is
difficult to assess. This type of contract is widely used for
complex studies, supervision of construction, advisory services,
and most training assignments. Payments are based on agreed
hourly, daily, weekly, or monthly rates for staff (who are normally
named in the contract) and on reimbursable items using actual
expenses and/or agreed unit prices. The rates for staff include
salary, social costs, overheads, fees (or profit), and, where
appropriate, special allowances. This type of contract should
include a maximum amount of total payments to be made to the
consultants. This ceiling amount should include a contingency
allowance for unforeseen work and duration and provision for
price adjustments, where appropriate. Time-based contracts
need to be closely monitored and administered by the client to
ensure that the assignment is progressing satisfactorily and
payments claimed by the consultants are appropriate. Again the
Guidelines on fees for Consultants issued by the Department of
Public Service and Administration should be used as a benchmark
to establish the appropriate tariffs, or to determine the
reasonableness of the tariffs.
5.12.3 Retainer and/or Contingency (Success) Fee Contract: Retainer
and contingency fee contracts are widely used when consultants
(banks or financial firms) are preparing companies for sales or
mergers of firms, notably in privatization operations. The
remuneration of the consultant includes a retainer and a success
fee, the latter being normally expressed as a percentage of the
sale price of the assets.
5.12.4 Percentage Contract: These contracts are commonly used for
architectural services. They may be also used for procurement
and inspection agents. Percentage contracts directly relate the
fees paid to the consultant to the estimated or actual project
construction cost, or the cost of the goods procured or inspected.
The contracts are negotiated on the basis of market norms for the
services and/or estimated staff-month costs for the services, or
competitive bid. It should be borne in mind that in the case of
architectural or engineering services, percentage contracts
implicitly lack incentive for economic design and are hence
discouraged. Therefore, the use of such a contract for
architectural services is recommended only if it is based on a fixed
target cost and covers precisely defined services (for example, not
works supervision).
5.12.5 Indefinite Delivery Contract (Price Agreement): These contracts
are used when accounting officers need to have “on call”
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specialized services to provide advice on a particular activity, the
extent and timing of which cannot be defined in advance. These
are commonly used to retain “advisers” for implementation of
complex projects (for example, dam panel), expert adjudicators for
dispute resolution panels, accounting officers’ reforms,
procurement advice, technical troubleshooting, and so forth,
normally for a period of a year or more. The accounting officer
and the firm agree on the unit rates to be paid for the experts and
payments are made on the basis of the time actually used.
5.13 Important Provisions for Contracts with Consultants
5.13.1 Currency. RFPs should clearly state that firms must express the
price for their services, in Rand. If the consultants wish to express
the price as a sum of amounts in different foreign currencies, they
may do so, provided that the accounting officer concurs with this
practice and that the proposal includes no more than three foreign
currencies outside the borders of South Africa. The accounting
officer should require consultants to state the portion of the price
representing local costs in Rand. Payment under the contract
should be made in the currency or currencies expressed in the
formal contract.
5.13.2 Price Adjustment. To adjust the remuneration for foreign and/or
local inflation, a price adjustment provision should be included in
the contract if its duration is expected to exceed 12 months.
Exceptionally, contracts of shorter duration may include a
provision for price adjustment when local or foreign inflation is
expected to be high and unpredictable.
5.13.3 Payment Provisions. Payment provisions, including amounts to be
paid, schedule of payments, and payment procedures, should be
agreed upon during negotiations. Payments may be made at
regular intervals (as under time-based contracts) or for agreed
outputs (as under lump sum contracts). Payments for advances
(for example, for mobilization costs) exceeding 10 percent of the
contract amount should normally be backed by advance payment
securities. Payments should be made promptly in accordance
with the contract provisions. To that end,
• consultants can be paid directly by the accounting officer;
• only disputed amounts should be withheld, with the remainder
of the invoice paid in accordance with the contract; and
• the contract should provide for the payment of financing
charges if payment is delayed due to the client’s fault beyond
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the time allowed in the contract. The rate of charges should be
specified in the contract.
5.13.4 Bid and Performance Securities. Bid and performance securities
are not recommended for consultants’ services. Their
enforcement is often subject to judgement calls, they can be
easily abused and they tend to increase the costs to the
consulting industry without evident benefits, which are eventually
passed on to the accounting officer.
5.13.5 Accounting officer’s contribution. The accounting officer normally
assigns members of his/her professional staff to the assignment in
different capacities. The contract between the accounting officer
and the consultant should give the details governing such staff,
known as counterpart staff, as well as facilities that should be
provided by the accounting officer, such as housing, office space,
secretarial support, utilities, materials and vehicles. The contract
should indicate measures the consultant can take if some of the
items cannot be provided or have to be withdrawn during the
assignment and the compensation the consultant will receive in
such a case.
5.13.6 Conflict of Interest. The consultant should not receive any
remuneration in connection with the assignment except as
provided in the contract. The consultant and its affiliates should
not engage in consulting activities that conflict with the interests of
the client under the contract, and should be excluded from
downstream supply of goods or construction of works or purchase
of any asset or provision of any other service related to the
assignment other than a continuation of the “Services” under the
ongoing contract.
5.13.7 Professional Liability. The consultant is expected to carry out its
assignment with due diligence and in accordance with prevailing
standards of the profession. As the consultant’s liability to the
accounting officer will be governed by the applicable law, the
contract need not deal with this matter unless the parties wish to
limit this liability. If they do so, they should ensure that:
• there should be no such limitation in case of the consultant’s
gross negligence or wilful misconduct;
• the consultant’s liability to the accounting officer in no case be
limited to less than the total payments expected to be made
under the consultant’s contract, or the proceeds the consultant
is entitled to receive under its insurance, whichever is higher;
and
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• any such limitation may deal only with the consultant’s liability
toward the client and not with the consultant’s liability toward
third parties.
5.13.8 Staff Substitution. During an assignment, if substitution is
necessary (for example, because of ill health or because a staff
member proves to be unsuitable), the consultant should propose
other staff of at least the same level of qualifications for approval
by the accounting officer.
5.13.9 Applicable Law and Settlement of Disputes. The contract should
include provisions dealing with the applicable law and the forum
for the settlement of disputes. Should it not be possible to settle a
dispute by means of mediation, the dispute may be settled in a
South African court of law.
5.14 Information to Consultants (ITC)
5.14.1 Scheduling the Selection Process
5.1 4.1 .1 Modifications of Contract
5.14.1.1.1 Any granting of a substantial extension of the stipulated time for
performance of a contract, agreeing to any substantial
modification of the scope of the services, substituting key staff,
waiving the conditions of a contract, or making any changes in the
contract that would in aggregate increase the original amount of
the contract by more than 15 percent, will be subject to the
approval of the accounting officer or his / her delegate.
5.14.1.1.2 Whenever possible, the accounting officer should use RFPs,
which include the ITC, covering the majority of assignments. If
under exceptional circumstances, the accounting officer needs to
amend the standard ITC, it should do so through the technical
data sheet and not by amending the main text. The ITC should
include adequate information on the following aspects of the
assignment:
• a very brief description of the assignment;
• standard formats for the technical and financial proposals;
• the names and contact information of officials to whom
clarifications should be addressed and with whom the
consultants’ representative should meet, if necessary;
• details of the selection procedure to be followed, including:
- a description of the two-stage process, if appropriate;
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- a listing of the technical evaluation criteria and weights
given to each criterion;
- the details of the financial evaluation;
- the relative weights for quality and cost in the case of
QCBS;
- the minimum pass score for quality; and
- the details on the public opening of financial proposals;
• an estimate of the level of key staff inputs (in staff-months)
required of the consultants; and indication of minimum
experience, academic achievement, and so forth, expected of
key staff or the total budget, if a given figure cannot be
exceeded;
• information on negotiations; and financial and other
information that should be required of the selected firm during
negotiation of the contract;
• the deadline for submission of proposals;
• a statement that the firm and any of its affiliates should be
disqualified from providing downstream goods, works, or
services under the project if, in the accounting officer’s
judgement, such activities constitute a conflict of interest with
the services provided under the assignment;
• the method in which the proposal should be submitted,
including the requirement that the technical proposals and
price proposals be sealed and submitted separately in a
manner that should ensure that the technical evaluation is not
influenced by price;
• request that the invited firm acknowledges receipt of the RFP
and informs the accounting officer whether or not it will be
submitting a proposal;
• the short list of consultants being invited to submit proposals,
and whether or not associations between short-listed
consultants are acceptable;
• the period for which the consultants’ proposals should be held
valid (normally 60-90 days) and during which the consultants
should undertake to maintain, without change, the proposed
key staff, and should hold to both the rates and total price
proposed; in case of extension of the proposal validity period,
the right of the consultants not to maintain their proposal;
• the anticipated date on which the selected consultant should
be expected to commence the assignment;
• a statement indicating all prices should be VAT inclusive;
• if not included in the TOR or in the draft contract, details of the
services, facilities, equipment, and staff to be provided by the
accounting officer;
• phasing of the assignment, if appropriate; and likelihood of
follow-up assignments;
• the procedure to handle clarifications about the information
given in the RFP; and
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• any conditions for subcontracting part of the assignment.
5.14.2 Disbursements
5.15.2.1 The responsibility for the implementation of the project, and
therefore for the payment of consulting services under the project,
rests solely with the accounting officer.
5.14.3 Consultants’ Role
5.14.3.1 When consultants receive the RFP, and if they can meet the
requirements of the TOR, and the commercial and contractual
conditions, they should make the arrangements necessary to
prepare a responsive proposal (for example, visiting the principal
of the assignment, seeking associations, collecting
documentation, setting up the preparation team). If the
consultants find in the RFP documents — especially in the
selection procedure and evaluation criteria — any ambiguity,
omission or internal contradiction, or any feature that is unclear or
that appears discriminatory or restrictive, they should seek
clarification from the accounting officer, in writing, within the
period specified in the RFP for seeking clarifications.
5.14.3.2 In this connection, it should be emphasized that the specific RFP
issued by the accounting officer governs each selection. If
consultants feel that any of the provisions in the RFP are
inconsistent with the prescripts of the Framework for Supply Chain
Management and / or the PPPFA and its Regulations, they should
raise this issue with the accounting officer in writing.
5.14.3.3 Consultants should ensure that they submit a fully responsive
proposal including all the supporting documents requested in the
RFP. It is essential to ensure accuracy in the curricula vitae of
key staff submitted with the proposals. The curricula vitae should
be signed by the consultants and the individuals and dated. Non-
compliance with important requirements should result in rejection
of the proposal. Once technical proposals are received and
opened, consultants should not be required nor permitted to
change the substance, the key staff, and so forth. Similarly, once
financial proposals are received, consultants should not be
required or permitted to change the quoted fee and so forth,
except at the time of negotiations carried out in accordance with
the provisions of the RFP.
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5.14.4
5 . 14 . 4.1
5 . 14 . 4.2
5 . 14 . 4.3
5.14.5
5 . 14 . 5.1
Confidentiality
The process of proposal evaluation is confidential until the
contract award is notified to the successful firm. Confidentiality
enables the accounting officer to avoid either the reality or
perception of improper interference. If, during the evaluation
process, consultants wish to bring additional information to the
notice of the accounting officer, they should do so in writing.
If consultants wish to raise issues or questions about the selection
process, they should communicate directly in writing with the
accounting officer in this regard. All such communications should
be addressed to the head of the department / division for the
relevant sector for the accounting officer.
Communications that the accounting officer receives from
consultants after the opening of the technical proposals should be
handled as follows:
• In the case of contracts any communication should be sent to
the accounting officer for due consideration and appropriate
action. If additional information or clarification is required from
the consultant, the accounting officer should obtain it and
comment on or incorporate it, as appropriate, in the evaluation
report.
Debriefing
If after notification of award, a consultant wishes to ascertain the
grounds on which its proposal was not selected, it should address
its request in writing to the accounting officer. If the consultant is
not satisfied with the explanation given by the accounting officer,
the consultant may refer this matter to the relevant treasury,
Public Protector or court of law.
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Logistics Management
6
6.1 Introduction
6.1.1 This aspect pertains, among others, to coding of items, setting of
inventory levels, placing of orders, receiving and distribution,
stores/warehouse management, expediting orders, transport
management and vendor performance. This process should also
activate the financial system to generate payments.
6.1 .2 The aspect of coding, levels of required stocks, etc. should not be
dealt with in isolation by the accounting officer. It is the objective
that throughout government the same coding and other support
systems should be used.
6.2 Stock Levels
6.2.1 Due to protracted lead times, or because of a need to keep
specific items in stock, the following should be determined in order
to automate the ordering process:
• which items and quantities thereof to be kept in stock;
• minimum/maximum levels to be kept in stock based on
consumption figures or inputs from users; and
• allowing for a safety margin (±20%) to be added to the
minimum level to cover unforeseen circumstances.
Note: The concept of just-in-time delivery should be considered,
as such arrangements may lower the cost of storage and result in
the sharing of risks with the relevant suppliers.
6.3 Placing of Orders
An order should be placed either when a pre-determined stock
level for inventory items is reached or when a request is received
from an end user for an item, which is not held in stock.
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6.4 Order Processing
6.4.1 Contract Purchase
Where a contract exists, orders should be placed for the item from
the contract.
6.4.2 Price Quotation / Competitive Bidding Method
Where there is no contract, the price quotation or competitive
bidding method of ordering should be applied within delegated
authority.
6.5 Vendor Management
The reliability of the supplier should be monitored in terms of,
among others:
• delivery periods;
• quality; and
• quantity.
Should problems be encountered, they should be followed up with
the vendor and, if it is a contract item, it should also be reported to
the body that arranged the contract.
6.6 Stores / Warehouse Management
6.6.1 Expediting of orders: If the delivery conditions reflected on the
order form are not complied with, it should be followed up with the
supplier immediately.
6.6.2 Receiving of items: All goods received should be verified for
quality and quantity against the ordering documentation. It is
recommended that a receipt voucher be generated for payment
purposes.
6.6.3 Storage: Municipal, legal stipulations and safety regulations
should be complied with when items are being stored, e.g.
flammables, poison, explosives, ammunition, weapons, etc. An
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effective item location system should be utilized. Shelf-life of
stock should be taken into consideration.
6.6.4 Stock and equipment should be stored properly and arranged in
such a manner that the checking and handling thereof are being
facilitated and the possibility of damage, exposure, deterioration and
perishing thereof be limited or eliminated.
6.6.5 A proper record of all the applicable assets, or groups of assets of
the municipality / municipal entity should be maintained by the
accounting officer.
6.7 Issuing/Distribution of Items
• An issue voucher should be generated for all goods issued.
• Consumable items should not be recorded after issue.
• Non-consumable items should be recorded from receipt to
disposal.
• SCM Practitioners should ensure that goods are delivered
promptly to the end-user.
6.8 Stocktaking
Stocktaking of all inventory and capital assets shall be conducted
at least once a year. This procedure entails the comparison of
assets counted with official records. Any deficiencies should then
be accounted for.
6.9 Transport Management
• Trip authority should be properly authorised and correctly
utilised.
• Proper records should be maintained.
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6.10 Accounts Payable
The relevant documentation should be submitted promptly for
payment to avoid interest charges.
6.11. Losses/Surpluses
The accounting officer should ensure that, among others, the
following preventative mechanisms are in place to eliminate theft,
losses, wastage and misuse of assets:
• all damages to and losses of assets be accounted for;
• damages and losses be investigated with a view to possible
recovery; and
• surpluses are taken on record as assets immediately.
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Disposal Management
7
7.1 Disposal is the final process when a municipality / municipal entity
needs to do away with unserviceable, redundant or obsolete
movable assets. It is recommended that the accounting officer
appoint a specific committee to deal with disposals, to make
recommendations with regard to the disposal of any asset. It is
the responsibility of the accounting officer or his/her delegate to
consider the recommendation of the appointed committee.
7.2 Disposal of any capital assets must be done in accordance with
sections 1 4 and 90 of the MFMA.
7.3 If disposal of any asset is approved, any of the methods indicated
below may, among others, be followed:
• Transfer to another municipality / municipal entity at market
related value or when appropriate free of charge;
• Selling per price quotation, competitive bid or auction,
whichever is most advantageous to the municipality /
municipal entity; or
• Destroying such assets.
7.4 Should the sale of the movable assets not be at market related
value, by price quotation, competitive bid or auction, the reasons
for the disposal in such a manner should be motivated, certified
and recorded for auditing purposes by the accounting officer or
his/her delegate.
7.5 All assets transferred to another municipality / municipal entity
should be by means of an issue voucher.
7.6 Firearms may not be sold or donated to any person or municipality
/ municipal entity within or outside the RSA without the approval of
the National Conventional Arms Control Committee. The contact
address is:
Directorate:
Conventional Arms Control
Defence Secretariat
Department of Defence
Private Bag X910
Pretoria
0001
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Tei. No. (01 2) 3556223 Fax. No. (01 2) 3556274
7.7 In cases where stores (inventory) items or capital assets are
traded in for other assets, the highest possible trade-in price is to
be negotiated. The order placed should be for the net amount, as
charged against the vote. The actual value of the new item
should, however, be reflected on a relevant register.
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Supply Chain Performance Measurements
8.1 Here a monitoring process takes place, undertaking a retrospective
analysis to determine whether the proper process is being followed
and whether the desired objectives are achieved.
8.2 The National Treasury has developed a reporting template that will
be used by the provincial treasuries to monitor the SCM
implementation process at the relevant municipalities.
8.3 To continuously improve the supply chain performance,
municipalities / municipal entities should develop their own
monitoring processes that would enhance their supply chain
performance. Issues to be reported, amongst others, include:
• Achievement of preferential procurement goals and
objectives;
• Implementation of supply chain management policy of the
municipality / municipal entity;
• Compliance to SCM norms and standards such as municipal
supply chain management regulations, National Treasury’s
model policy, standard bid documents and the general
conditions of contract;
• Savings generated, amongst others, by arranging contracts
for the purpose of developing economies of scale;
• Stores efficiency, e.g. proper layout of stores through clear
bin locations and bin numbering, promptly satisfying the
users requirements, etc,
• Contract breach either by the municipality / municipal entity
or the contractor;
• Cost efficiency of the procurement process. In the case of a
sole supplier for a particular good, work or service where the
market has already been tested, why must the municipality /
municipal entity embark on a competitive bidding process for
the same good, work or service?
• Whether supply chain objectives are consistent with
Government’s broader policy focus on trade, small business
development, anti-corruption measures, proudly South
African etc.
8.4 It is recommended that at the completion stage of each project, an
assessment of the service supplier (including consultants where
applicable) be undertaken and that this assessment should be
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available for future reference. Accounting officers should take
cognisance of the fact that when suppliers do not perform
according to their contractual obligations and the accounting officer
does not address him/her in this regard during the execution of the
contract, such non-performance cannot be deemed as sound
reason for passing over the bid of such supplier when adjudicating
future bids.
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Annexure A
Supply Chain Management Legislation and Directives
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1 Constitutional Provisions
• Section 217 (1) of the Constitution of the Republic of South
Africa, 1996 (Act 108 of 1996) provides the basis for
procurement and determines that:
“When an organ of state in the national, provincial or local
sphere of government, or any other municipality / municipal
entity identified in national legislation, contracts for goods or
services, it must do so in accordance with a system which is
fair, equitable, transparent, competitive and cost-effective”.
• Section (2) & (3) further confers an obligation for national
legislation to prescribe a framework providing for preferential
procurement to address the social and economic imbalances
of the past.
• Sections 215-219 of the Constitution further require the
National Treasury to introduce uniform norms and standards
within government, ensuring transparency and expenditure
control measures, which should include best practices related
to supply chain management.
2. The Local Government: Municipal Finance
Management Act, 2003
• The Local Government: Municipal Finance Management Act,
2003 (MFMA) aims to modernise budget and financial
management practices in order to maximize the capacity of
municipalities and municipal entities to deliver services to all its
residents, customers, users and investors.
• Section 62(1 )(f)(iv) requires that the municipal manager as the
accounting officer of a municipality or the CEO of the municipal
entity, must ensure that the municipality / municipal entity has
and implements a supply chain management policy in
accordance with Chapter 1 1 of the Act, which allows managers
to manage, and make them more accountable.
• Chapter 11 of the Act applies to supply chain management of
municipal goods and services.
• All long-term contracts (i.e. longer than three years) have to
comply with sections 33 and 1 16 of the MFMA, and in addition,
the following sections will also apply:
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- Section 120, for Public Private Partnerships;
- Section 19, for Capital Projects.
3. The MFMA and other related legislation
Apart from the Constitution and other national and local government
legislation as mentioned, the following will have a direct or indirect
impact on supply chain administration:
• Intergovernmental Fiscal Relations Act establishes the
process of consultation for budget allocations, including the
role of the budget Forum. During this process the objectives
of supply chain planning should be formulated.
• Division of Revenue Act provides national allocations for the
local government sphere by municipality, for its three-year
financial period. The allocation of funds indicates the
implementation feasibility of the municipality / municipal
entity’s supply chain strategies.
• Municipal Systems Act (Act 32 of 2000)(MSA): Section 80 &
81 of the MSA applies when supply chain planning involves
outsourcing of a municipal service to an external service
supplier.
4. Preferential Procurement Policy Framework Act
No. 5 of 2000
• In order to adhere to the requirements of the constitution,
Parliament approved the Preferential Procurement Policy
Framework Act (PPPFA). This Act is applicable to all organs of
state in the national, provincial and local spheres of
Government;
• The Act incorporates a 80/20 (for the procurement, sale and
letting up to a Rand value of R500 000) and 90/10 (for the
procurement, sale and letting with a Rand value of above R500
000) preference systems;
• All organs of the state should apply the prescribed preference
points system and refrain from using set-aside practices.
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5. Preferential Procurement Regulations of August 2001
The Preferential Procurement regulations were issued in terms of
the PPPFA and published in the Government Gazette on 10 Auqust
2001 .
Some of the important aspects mentioned in the Regulations are as
follows:
• Organs of state must ensure that proper planning and
calculations of the estimated costs are done prior to
prescribing the appropriate preference system in the bid
invitation;
• Penalties or other remedial actions may be applied for
furnishing false information or not achieving the goals for
which an undertaking was given;
• No contracts will be awarded to bidders who do not have their
tax matters in order;
• The preference points system which will be applied as well as
the goals to be achieved, must be clearly spelt out in the
bidding documents;
• Bids must be awarded to the bidder scoring the highest
number of points. In the event that two or more bidders have
scored equal total points, the successful bidder must be the
one scoring the highest number of points for specified goals.
Should there be equal bidders in all respects, the award shall
be decided by the drawing of lots;
• A contract may on reasonable and justifiable grounds be
awarded to a bidder that does not score the highest number of
points. The reasons must, however, be defendable in a court
of law.
• Preference points stipulated in respect of a bid must at all
times include points for equity ownership by a HDI as
contemplated in paragraph 1(h)(1) of the Preferential
Procurement Regulations
6. Reviewing the PPPFA and its Regulations
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The current PPPFA and its associated regulations promote HDI’s
and a broad-ranging set of developmental objectives by means of
allotting preference points to these various policy objectives. The
unlimited discretion currently afforded to practitioners to allot
points to these objectives has watered down the impact of
promoting HDI’s very significantly. The narrow based black
ownership structure in the South African economy also limits the
scope for an immediate meaningful acceleration of direct
participation by HDI’s in Government contracts. This gives rise to
a great number of artificially created partnership and joint venture
arrangements (fronting practices), where the premiums under the
preferential system are ‘earned’ without any real contribution to
achieving Government’s preferential policy objectives.
To overcome the flaws associated with the PPPFA and its
regulations, National Treasury is in a process of reviewing its
preferential procurement regulations and aligning it to the Broad-
Based Black Economic Empowerment Act (BBBEEA), Act 53 of
2003.
Until this reviewing process has been completed and revisions to
the PPPFA and its regulations are promulgated, it is necessary for
accounting officers to apply the current PPPFA and its
Regulations. Adherence to the prescripts of the Preferential
Procurement Regulations is compulsory and municipality /
municipal entity will be informed of any amendments of these
regulations.
7. Broad-Based Black Economic Empowerment Act
(BBBEEA), Act 53 of 2003
The President signed the Broad-Based Black Economic
Empowerment Act (BBBEEA) on 9 January 2004. This will,
amongst other, provide that the Minister of Trade and Industry
may develop broad-based charters to promote BEE, and issue
codes of practice that could include qualification criteria for
preferential procurement and other economic activities.
8 The Broader SCM Related Policy Context
Government’s supply chain policies and practices impact on a
broad range of other policies and regulations and also influence
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the economic behaviour of people, both within and outside the
borders of the country. It is therefore imperative that supply chain
implementation initiatives remain fully aligned with Government’s
broader policy focus and accounting officers should be aware of:
■ Competition Law: Restrictive business practices are regulated
by the Competition Act (89 of 1998), which aims to outlaw anti-
competitive practices between businesses, their supplier(s)
and customers. This includes price-fixing and collusive
bidding;
■ The National Small Business Act, Act No. 102 of 1996: This
Act establishes the National Small Business Council (NSBC)
and also the Ntsika Enterprise Promotion Agency (Ntsika).
The main function of Ntsika is to enable small businesses to
compete successfully in the economy;
■ Anticorruption Measures and Practices: The Constitution
provides for rights such as just administration and access to
information and requires high standards of ethics within public
administration. Recent legislation dealing with transparency
and anti-corruption measures strengthen Government’s ability
to combat corruption and also protects employees making
disclosures against their employers in both the public and
private sectors;
■ State Information Technology Agency (SITA) Act, (Act No. 88
of 1998, as amended by Act No. 38 of 2002): This Act
prescribes that SITA may assist municipalities and municipal
entities with the acquisitioning of all IT related goods and
services. A separate Service Level Agreement between SITA
and the municipality / municipal entity should cover the
payment to SITA for services rendered to the municipality /
municipal entity. The accountability remains with the
accounting officer;
■ Trade Policy. Government’s commitment to trade liberalisation
should be reflected in its supply chain practices, by not
precluding foreign companies from bidding for government
contracts;
■ Labour Issues: As Government subscribes to international best
practice principles of equitable and fair labour practices,
accounting officers should ensure that suppliers/contractors
comply with all provisions of Labour Law. Hence any supplier,
service supplier or contractor who abuses labour standards,
should be designated as ‘non-preferred’.
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■ Safety, Health and Environment: Government is committed to
the highest standards of safety, health and environmental
protection and promotes a culture of “non tolerance”. Hence
occupational health and safety issues should be considered
not only for employees but also for contractors’ employees
performing work on site at any municipality / municipal entity.
■ Public-Private Partnerships: Whenever goods, works and/or
services are procured by means of public private partnerships,
the relevant Treasury Regulations must be adhered to;
■ New Partnership for Africa’s Development (NEPAD): NEPAD
is an initiative to accelerate a new relationship with the highly
industrialised countries to overcome the widening development
chasm between them and the African continent. A commitment
is fostered on the part of governments, the private sector and
other municipality / municipal entity of civil society towards the
meaningful integration of all nations into the global economy
and body politic. This requires the recognition of global
interdependence in respect of production and demand, the
protection of the environmental base that sustains the planet,
reversal of the skills-loss from the continent and a global
financial architecture that rewards good socio-economic
management and global governance. All SCM practices
should aim to support these objectives.
■ Proudly South African: The Department of Trade and Industry
has become a key sponsor and strategic partner of the
‘Proudly South African’ campaign, which encourages South
African companies to submit interesting and innovative
achievements in the manufacturing field - new products,
export achievements, new partnerships and successes and
milestones. The objectives of this campaign should be
supported through government’s SCM processes, if and when
opportunities arise.
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ANNEXURE B
MUNICIPAL SCM IMPLEMENTATION TEMPLATE
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MUNICIPAL SUPPLY CHAIN MANAGEMENT (SCM) IMPLEMENTATION TEMPLATE
REF
ACTION
RESPONSIBILITY
TARGET DATE
1 .
Council / Board of Directors adopt SCM policy, preferably the SCM
model policy compiled by National Treasury. Deviations must be
reported to the National Treasury and the relevant Provincial
Treasury
2.
Compile SCM delegations.
3.
Establish SCM unit preferably under the supervision of the CFO.
4.
Align with new SCM threshold values, where applicable.
5.
Apply new SCM bid documents, including General Conditions of
Contract.
6.
Establish SCM bid committee structures.
7.
Compile internal SCM procedures and processes.
8.
Compile list of accredited prospective providers.
9.
Training of SCM practitioners.
10.
Report to Mayor / Board of Directors regarding implementation of
SCM policy
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